Harry Luby opened the first Luby’s Cafeteria in Dallas in 1929. Son Robert Luby worked for his father before opening his own restaurant of the same name in Corpus Christi. After his military service during World War II, Robert Luby founded the Luby’s Inc. restaurant chain. Photo courtesy of the hotel
By Suzanne Freeman
June 05, 2020
Luby’s is for sale. The Houston-based restaurant company announced on June 3 that it was selling one or more of its three chains, including Fuddruckers and Cheeseburger in Paradise. Selling Luby’s is just one of several ways the company has to keep the restaurants open for business. Other options include selling the divisions and real estate – the cornerstone of Luby’s cafeterias – or selling the entire company.
Duff & Phelps Securities of Chicago handles the sale of the Luby’s and Cheeseburgers in Paradise, while Brookwood Associates of Atlanta handles the sale of the Fuddruckers.
“This path offers the potential to house the restaurant business with well capitalized owners in the future,” said Christopher J. Pappas, CEO and President of Luby, in a media release.
Luby was founded as a chain in San Antonio by Robert Luby in 1947 and originally offered home-style cafeteria-style cooking made from fresh produce – the first fast-casual restaurant in a now hip chain restaurant. Although COVID-19 restrictions were hurting the chain, the problems started back in 1997 when a new CEO replaced his menu made from scratch with pre-made and frozen ingredients. A return to its original business plan a few years later did not fully repair the damage.
Along the way, the company acquired Fuddruckers, a hamburger chain for dressing up, and Culinary Contract Services, owner of Cheeseburger in Paradise.
Luby’s started selling real estate in 2018 to improve its bottom line. A committee was formed last September to develop a strategy to maximize shareholder value.
The numbers showed a slight increase in sales for the first 12 weeks of the year, which ended on March 12 just before the COVID-19 shutdowns. On-site dining was discontinued on March 17th. By the end of the month, the restaurant had taken more than half of its corporate and administrative employees on leave and cut everyone else’s salaries.
Currently, Luby’s restaurants sales are around 75 percent of pre-pandemic levels.
“We have revised the restaurant operations to achieve cost efficiency, which leads to higher operating margins in the restaurant, even if the sales level does not return to the level before the COVID-19 pandemic,” said the company’s latest quarterly report.
Luby’s has been criticized for applying for and receiving $ 10 million Paycheck Protection Program loans approved by Congress in the first COVID-19 stimulus plan, and defended its need for funding. PPP loans were supposed to help small businesses pay their employees, even if doors were closed to customers during the pandemic. However, the PPP provided an exception for restaurants, catering services, caterers and hotels with fewer than 500 employees per location.
While the company is up for sale, there is also a risk that it will be delisted from the New York Stock Exchange. Starting in April, the company has six months to bring its share prices to levels acceptable for the NYSE.
Luby’s two restaurants in Corpus Christi have remained closed due to the COVID-19 pandemic. The 1949 Fuddruckers on South Padre Island Drive are open to dine-in services at 50 percent capacity. From June 12th, restaurants can be occupied to 75 percent.
For the latest news on COVID-19, please visit CCBizNews.com/covid-19. If you think you have the coronavirus, contact the Corpus Christi-Nueces County Health District at 361-826-7200. A representative will give you instructions. Visit the city’s website for more information.
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