The chiefs at The Cheesecake Factory, Fiesta Restaurant Group, Del Taco, Port of Subs, Texas Roadhouse and Noodles & Co. say curbside and to-go delivery are here to stay.
1. The Cheesecake Factory
Chairman and CEO David Overton said on an earnings call, “The size of our restaurants and our flexible seating layouts will uniquely enable us to ensure ample levels of social distancing while maintaining sufficient seating capacity to generate what we believe could be meaningful sales volumes.” Large mall locations are proving an advantage during COVID-19, according to executive vice president and CFO Matthew Clark: “We have fantastic parking, great access that has really enabled us to operate the frictionless delivery and pickup, and with our own doors and operating hours, maintaining that connection to the guests has been super important. We essentially operate just like any high-street location, even though we happen to be in those malls.”
2. Fiesta Restaurant Group
Sales have improved daily at Fiesta after dropping 32 percent in the last three weeks of the first quarter. The company, which operates the 277-unit Pollo Tropical and 176-unit Taco Cabana chains, is modifying seating arrangements to ensure distance between guests, and it’s adding credit card-processing devices outside the drive-thru to allow for distancing. “We’ve created separate entrance and exit access points to ensure guest distancing,” president and CEO Rich Stockinger said on an earnings call. The company also is monetizing its real estate to shore up the balance sheet with 14 sale-leasebacks of its owned properties.
3. Del Taco
Del Taco is deferring half of each franchisee’s royalty payment for the first seven weeks of lockdown. It also is waiving 1.5 percent of the typical 4 percent systemwide marketing fee for eight weeks and deferring franchise sublease payments for six weeks, according to president and CEO John Cappasola. The company, which has 580 locations, also is helping many of its 380 franchisees access funds from the Coronavirus Aid, Relief, and Economic Security Act, he said on an earnings call. In the past five weeks, Del Taco’s same-restaurant sales growth has progressed from negative-30 percent to negative-10 percent, he said. “As consumers begin to experience stay-at-home fatigue and grow tired of pantry stocking, they become more willing to order at the drive-thru window, carry out and increase utilization of delivery options. We also believe stimulus checks may have contributed to the improvement.”
4. Port of Subs
John Larsen, CEO of Port of Subs sandwich shop, expects to lose between 5 and 7 percent of his franchisees due to lockdowns. “The business model begins to break down a little bit,” he said. The Reno, Nevada-based chain has 135 stores, 25 of them company owned. The chain’s stores are operating at between 60 and 75 percent of standard sales, he said, adding that restaurants need to operate at 80 percent of standard sales to break even. “We’re coming back 2 to 4 percent each week,” he said. “There is a lot of pent-up demand.” Port of Subs, which secured a Paycheck Protection Program loan from the federal government in April, has abated half of the royalty charge for each franchisee for April and May. Larsen said his landlords have been generous in turn. “We’re getting anywhere from 5 to 20 percent abatement,” he said. As for the future, Port of Subs will look at smaller footprints than its current 1,400 to 1,600 square feet, possibly 1,000 to 1,100 square feet. “I don’t think as many people are going to be sitting down eating inside,” Larsen said.
RELATED: Franchising: A big brand name doesn’t mean a big business on the lease
5. Texas Roadhouse
To-go business at Texas Roadhouse, which has added family packs and ready-to-grill steaks to its menu, has grown by 575 percent from $8,400 per week in January to over $56,000 in the last week of April. The company is continuing construction on only nine new restaurants, including one relocation. All were substantially complete when lockdowns set in. Moving forward after the pandemic, any future units likely will incorporate sanitation, distancing features like Plexiglass dividers between booths, and curbside pickup and to-go service, founder and CEO Kent Taylor said on an earnings call. “We’re rethinking how we can better execute from a building standpoint.” All the company’s 600 units are now open for business in some capacity.
RELATED: Developers are cutting pipelines but building essential new stores
6. Noodles & Company
“We are not in a rush necessarily to open our dining rooms because we have such a strong off-premise business,” said Dave Boennighausen, CEO of the 458-restaurant chain. Off-premise business accounted for over 60 percent of Noodles & Company’s sales during the first 10 weeks of the first quarter, he said on an earnings call. “Our food travels extremely well, and our guests are already accustomed to seamlessly ordering through our digital channels.” The company has cut its 2020 expansion goals to just four new restaurants.
RELATED: Is it worth it for restaurants to operate just takeout and delivery?
By Brannon Boswell
Executive Editor, Commerce + Communities Today