Menu innovations and tech changes are blasting the category pioneer out of COVID-19's depths.
It’s no secret COVID-19 has been especially hard on Dave & Buster’s.
Governmental restrictions tanked business, which relies heavily on entertainment, foot traffic, and the social experience. In Q2 2020, same-store sales plummeted 87 percent. In September, the chain gave notice it was laying off more than 1,350 employees and warned a potential bankruptcy could be on the horizon if it didn’t strike a deal with lenders.
But that’s the old Dave & Buster’s—a version company leaders are more than willing to leave in COVID-19's wake. With vaccinations increasing, case rates declining, and restrictions lessening, Dave & Buster's is now operating in an environment in which it can flex a host of new operational fixes, as well as historic strengths.
As proof, Dave & Buster’s began its first quarter with 107 open stores, or 76 percent of its footprint. By the end of the period (May 2), the company reopened 138 of its 141 restaurants. The brand generated $265 million in total sales in Q1, which surpassed the top end of its expected range, and established what CEO Brian Jenkins called “a new high watermark in our post-COVID sales recovery.” Same-store sales in April decreased just 12 percent compared to 2019, with half of comp stores experiencing positive growth.
Through the first five weeks of Q2, comps are down just 4 percent and total sales are running slightly ahead of pre-pandemic levels. The top quartile of units are growing 20 percent while the lowest quartile are declining about 25 percent. All stores are now back on line except two Canadian locations, and those are scheduled to reopen in a few months.
THE COVID-19 ROAD FOR DAVE & BUSTER'S SO FAR:
Dave & Buster's Enters the World of NFTs
Dave & Buster’s Restaurant Fleet is Coming Back to Life
The Game is About to Change at Dave & Buster’s
Dave & Buster’s Continues to Weather a Tough Winter
Things Will Get Worse for Dave & Buster’s Before They Get Better
Top Dave & Buster’s Stores Inch Closer to Regular Sales Levels
Dave & Buster’s Warns of Potential Bankruptcy
Dave & Buster’s is Reawakening as a Better Brand
Dave & Buster’s Takes $43 Million Virus Hit, Looks to Future
Dave & Buster’s Strikes $100 Million Agreement, Could Still End Up in Chapter 11
Dave & Buster’s to Sell Up to $75 million in Shares
Dave & Buster's Considers Selling Stake as Stores Shut Down
The sales rebound, combined with a lean operating model, drove high profit flow-through in the quarter, the company reported. Eighty-four percent of stores posted positive EBITDA across Q1 and 90 percent did so in April. Dave & Buster's as a whole returned to profitability for the first time since the onset of the pandemic with net income of $19.6 million, or 40 cents per diluted share.
“Clearly, we've come a long way over the past year. We are optimistic about our future as we implement strategic initiatives to modernize and enhance our food and beverage menu, service model, entertainment offerings, and guest engagement,” Jenkins said during the brand’s Q1 review. “With these initiatives and the steps that we took during 2020 to bolster our financial foundation, we are now a more competitive, more guest-centric company and positioned to be a more profitable business as our sales fully recover.”
Simply put, a new era is dawning for the industry, and the same can be said for Dave & Buster’s. COO Margo Manning reported the chain completed its transition to an elevated menu, with its new food identity, “Inspired American Kitchen” at the forefront. The updated menu offers 28 items, or a 33 percent decrease compared to pre-COVID. So far, items like the IPA Fish and Chips, Hawaiian Chicken Sandwich, and Mushroom Stout Burger are “big sellers on the menu” and “clearly resonating” with customers, Manning said. She further shared the next goal is to launch a freshly curated beverage menu early in Q4 to improve relevance and attachment.
Innovation is a major part of the strategy, beginning with the LTO summer beverage lineup featuring Elderflower tonics and Bomb Pop margaritas. And in September, Dave & Buster’s will offer a “heartier selection” of food and drink LTOs that pair well with football and Oktoberfest. Supporting this new menu is the completed rollout of high-speed ovens and an upgraded kitchen management system. The equipment simplifies operations by reducing cook times some 40 percent and by facilitating a seamless flow in the kitchen.
“We expect our new menu to drive an improved guest experience and increased food attachment rate, all aimed toward increasing food and beverage sales," Manning said.