Cicis is Initiating a Renewed Turnaround Strategy

    New owners plan to grow digital and drive franchise growth. 

    Cicis exterior of building.
    Cicis
    Cicis was purchased by D&G Investors, a joint venture by SSCP Management and Gala Capital Partners.

    Sunil Dharod, president of SSCP Management, has eyed Cicis for a long time. 

    The restaurateur has a strong, nostalgic connection to the brand. He lives in Dallas, close to where the company is based. And when his children were younger and playing sports, the post-game meals were routinely held at Cicis, along with the other kids and their families. 

    Dharod looked at buying the chain a few years, but the timing wasn’t quite right. Arlon Food and Agriculture Partners acquired the chain instead in September 2016. Four and a half years and an unprecedented global pandemic later, Cicis’ debt piled up and its future was once again up in the air. 

    This time around, Dharod was in a much better position to strike a deal. SSCP leveraged its close relationship with Gala Capital Partners to form D&G Investors. In December, the new company acquired Cicis’ $82 million debt load. The pizza chain then engaged D&G about a transaction, and after a stalemate over costs, the two sides reached a pre-packaged agreement that contemplated a 45-day bankruptcy process.

    In March, Cicis emerged from bankruptcy with strengthened leadership and financial structure. 

    “Our brand is for the communities to come together—a spot for families, different organizations, teams, neighborhood groups, etc., or to come into a place and have fun,” Dharod says. 

    In recent weeks, sales have remained slightly negative, but figures are trending upward. Dharod notes many guests are starting to use the MyCicis app, which has helped. A major win for the brand came in early March when Texas Gov. Greg Abbott announced all capacity restrictions would be removed. Dharod said the move improved consumer confidence in the state and boosted traffic. 

    Initially, D&G was concerned negativity surrounding the news of Cicis’ bankruptcy would harm sales. Much to their surprise, sales actually lifted the week the bankruptcy was filed in late January

    “It shows that the consumer really wants our brand, and we got a lot of feedback from our consumer that they want us around,” Dharod says. 

    Before COVID arrived, Cicis was feeling pressure from the growth of fast casuals and the third-party delivery market. So in 2019 and early 2020, the management team rolled out a strategy to improve efficiency and flexibility, such as refranchising stores and closing a distribution center to consolidate operations. However, the turnaround strategy was halted quickly when the pandemic arrived in March 2020.

    In 2019, the brand earned $177.3 million in revenue and $14.2 million in adjusted EBITDA. However in 2020, revenue declined to $76.3 million and adjusted EBITDA lowered to a negative $2.7 million. Cicis navigated COVID by prioritizing health and safety, pursuing off-premises, shifting to digital marketing, focusing on the value experience, and optimizing the cost structure, but the combination of restrictions and consumer hesitancy continued to significantly affect sales. At one point, Cicis defaulted on its credit agreement. 

    D&G’s transaction marks the fourth time in less than 20 years that Cicis has exchanged hands. Cicis was purchased in a management buyout by Levine Leichtman Capital Partners in 2003, which then sold the pizza chain to ONCAP Management Partners in 2007. Nine years later, Cicis was purchased by Arlon.

    Dharod is confident that the combined experience of SSCP and Gala Capital will right the ship for Cicis. SSCP operates 70 Applebee’s, 47 Sonic Drive-Ins, and is the parent of Roy’s Restaurant, a fine-dining concept. Meanwhile Anand Gala, founder and managing partner of Gala Capital, owns MOOYAH Burgers and serves as a Famous Dave’s operator. Each company has worked with numerous brands both as a franchisor and a franchisee. 

    “I think that gives us a pretty unique perspective and a good understanding of what franchisees’ needs are because we've been in those shoes and are currently in those shoes with several other brands,” Dharod says. “We should be able to move the brand forward and make this thing a very successful brand for all our franchises.”

    Cicis

    The chain's footprint has shrunk from 650 to under 300 in the past 12 years. 

    Going forward, one of the key turnaround initiatives will be investment in delivery, a sales channel that is relatively new for the brand. But the runway for growth is there; digital ordering and delivery at Cicis has grown 300 percent faster than dine-in traffic since 2014, according to bankruptcy court documents.

    D&G will also look to fix the footprint, which has shrunk rapidly in the past dozen years. In 2009, the chain operated roughly 650 stores in 33 states. At the beginning of 2020, Cicis had 395 stores, and when the chain declared bankruptcy this January, it was down to 307. As of March, the brand is now slightly under 300 units, which means roughly 100 stores have closed in a little over a year. 

    “Most, if not all brands at some point have to go through some closures, and it's not any different for us,” Dharod says. “We had some challenges with leases that were expensive or neighborhoods that now have moved away from where they were at one time. So just different things have come to this, and I feel like out of those 100 units, maybe there are some that if the landlords and us work together, we should be able to reopen.”

    Dharod says many franchisees have been in the system for a long time, and that they’re committed to the brand—two much-needed qualities to drive franchise growth. From D&G’s perspective, its role is to help franchisees improve their bottom line. For instance, if one franchisee is spending 30 percent on food costs and another is spending 25 percent, the question is where is that 5 percent going? The company wants to help franchisees understand and resolve those types of issues, in addition to labor costs or lease agreements. 

    Once operators make more money, expansion will soon follow, Dharod says.

    “That’s our strength, because as operators we understand where things can be saved or whether quality could be improved without additional expenses, and so on,” Dharod says. “And the brand used to do a lot of that a few years back. So some of it is just going back and reaching out into our drawers and doing things the way it was done before.”

    Throughout the pandemic, Cicis has adhered to strict sanitation standards—a particularly vital investment, considering the stigma around buffets. Locations have increased frequency of disinfecting procedures, made hand sanitizer available for customers and workers at registers and sinks, required all employees to use PPE, installed plexiglass guards at registers, and placed social distancing markers throughout the interior and exterior space. 

    To adjust to COVID times, Cicis covered the buffet with glass partitions, and food is served by employees—a method that’s resulted in a 100 basis point improvement in food costs. Dharod believes that practice, as well as the upgraded safety protocols, will continue in most places. 

    Cicis isn’t the only buffet that’s struggled. Garden Fresh Restaurants, which operated Souplantation and Sweet Tomatoes, dissolved last spring and shut down all 97 of its stores. In October, Golden Corral’s largest franchisee, 1069 Restaurant Group, declared bankruptcy with $49.7 million in unsecured debt.

    Despite the challenging environment, Dharod feels Cicis will reach positive growth when the pandemic subsidies. He adds that the company is financially strong and able to ride anything that may come up in the future. 

    “So if things are not right, we can slow things down and take a step back and regroup and move forward,” Dharod says. “Or if things are going great, we just get aggressive and continue to move forward.”