Chuy’s Holdings is preparing itself for the next stage of the pandemic as more than two-thirds of its footprint has reopened dining rooms.
Since the COVID-19 outbreak in March, 92 of the chain’s 101 restaurants have operated via off-premises only. Of those 92 units, 70 have allowed dine-in traffic to return, a process that began the week ending May 10.
CEO Steve Hislop said the priority is reopening dining rooms at the rest of those 92 stores. Then the company will evaluate the feasibility of opening the nine closed units.
“As you can imagine our goal is to reopen each restaurant in an efficient manner and also prioritize the safety and well-being of both our employees and guests,” said Hislop during the brand’s Q1 earnings call. “In addition to proper social distancing, we have established procedures for regularly sanitizing our restaurants, and our employees are following local guidelines with regard to glove and mask wearing. Early on, we’ve encountered a very positive response to reopening from our guests. I can tell you it’s been great to see the renewed energy in our restaurants as we welcome back our employees and guests.”
The dining rooms have been opened in areas ranging from 25-50 percent capacity. Hislop said stores are hardly capturing demand at a 25 percent capacity limit, but he added that those units are open to build momentum in preparation for 50 percent or even 75 percent capacity. CFO Jon Howie explained that most localities don’t count patios in the capacity limitations, so the brand has utilized the extra room outside with socially distanced tables.
Off-premises has more than tripled compared to pre-COVID sales, raising from the 14-15 percent range to around 45-50 percent; roughly 20 percent of that is delivery. Online ordering accounts for 45 percent of off-premises, compared to 18 percent before the pandemic. As dining rooms continue to reopen and operate at fuller capacity, Hislop expects the off-premises business to slide, but remain north of what it once was.
“We’re going to continue with the thought process,” Hislop said. “Obviously, we’ve learned a ton of stuff just to-go only on how to really set it up and how to stage it. And we’re going to continue that within the parking lot and in our store level operations also. But it’s here to stay. … Convenience is going to be a big plus. It’s going to be a major uptick in just casual also. Convenience of the guests, whether it be how they do to-go, how we do delivery, but also how we do the checks and do we have handhelds and all that stuff is going to become more and more important as we move down the road.”
In the first 10 weeks of Q1, same-store sales grew 3.3 percent due to a 4 percent rise in average check offset by a 0.7 decrease in traffic. The outbreak slowed revenue tremendously, with Chuy’s ending the quarter down 9.7 percent. Quarter to date, comps have dropped 52.4 percent. First-quarter revenue dropped 7.5 percent to $94.5 million due to a decline in traffic.
Here’s how average weekly sales have trended through the latter part of Q1 and into Q2:
- Week ending March 15: $73,200, –16.8 percent same-store sales (year-over-year)
- Week ending March 22: $27,900, –67 percent
- Week ending March 29: $32,656, –63.5 percent
- Week ending April 5: $33,873, –60.8 percent
- Week ending April 12: $36,440, –57.4 percent
- Week ending April 19: $42,660, –50.2 percent
- Week ending April 26: $42,300, –52.7 percent
- Week ending May 3: $40,200, –61 percent
- Week ending May 10: $57,500, –39.4 percent (impact from Cinco de Mayo and Mother’s Day)
- Week ending May 17: $48,500, –45.4 percent (34 percent of sales from dine-in)
Amid the pandemic Chuy’s furloughed 80 percent of hourly employees, 40 percent of store management, and 40 percent of corporate and administrative staff. Non-furloughed workers had their salaries reduced by 25-50 percent. Senior management had their pay cut by 50-75 percent and compensation for the board was suspended. Chuy’s is paying health premiums for eligible furloughed employees.
Howie said the company is in constant contact with employees about returning to work.
“I think we’ve done and communicated the right things and what our role is to be safe and cautious and to make sure we come out of this at the end of it better than when we even went into it and offer them and our group and our company a long-term strategy for success, not only for the company, but for them personally and professionally also,” Howie said. “So we’ve been in constant contact. We’re excited about how we dealt with this in a very personal way with all our employees.”
Chuy’s reduced its weekly cash burn rate to $200,000 compared to $500,000 in April, driven by the growth in off-premises and cost-saving initiatives. The brand canceled nonessential capital expenditures and temporarily suspended rent payments on operating leases and has continued to work with landlords to negotiate rent concessions, abatements, and deferral. The company expects roughly $3 million in tax refunds from the CARES Act.
As of May 17, the chain had approximately $27 million in cash on hand.