Luby’s CEO Chris Pappas is considering submitting an offer for the troubled restaurant brand, which is currently marching toward liquidation.
Earlier in September, Luby’s, which also includes Fuddruckers and Cheeseburger in Paradise, said it plans to liquidate its assets if it cannot find a purchaser. The proceeds, estimated to be between $92 million and $123 million, would be distributed to shareholders. After distribution, the company would dissolve. The adoption of the plan is contingent on approval from stockholders at a special meeting. The company did note that if it received an offer of superior value, it can abandon the liquidation in favor of the alternative.
A few days after Luby’s announced the liquidation plans, the company and Pappas, in his own capacity, entered into a confidential agreement. The agreement allows Pappas and his team to have access to confidential information to assist with his evaluation of whether to submit an offer.
According to the filing, Pappas has not decided if he or a group will submit an offer. If he does submit a proposal, Luby’s said there’s no guarantee that the offer would be accepted.
The SEC filing was filed jointly by Pappas and his brother, Harrison, who served as COO until his retirement in 2011. Individually, Pappas controls 4.6 million shares while Harrison owns 4.4 million. The two also jointly own Pappas Restaurants Inc., which controls 1.1 million shares. Combined, the brothers have a roughly 36 percent stake in the company.
Pappas referred to Luby’s financial results as “unacceptable” before COVID, and the pandemic only intensified those issues. Beginning March 17, Luby’s started closing dining rooms and furloughing employees due to COVID-19. More than half of the corporate staff was furloughed and salaries for non-furloughed employees were cut 50 percent.
Along the way, the brand received a $10 million loan from the Paycheck Protection Program and a delisting notice from the New York Stock Exchange. Luby’s announced in June that it was seeking a sale, but the company eventually decided to liquidate after it couldn’t find a buyer.
Restaurant sales declined 78.9 percent in Q3. Luby’s saw a 73.6 percent plummet while Fuddruckers figures decreased 90.8 percent. The brand posted a net loss of $25 million, compared to a loss of $5.3 million in the year-ago period. However, the brand did achieve a profit at open stores in the final month of Q3. In addition, open Luby’s garnered 80 percent of prior year sales by the end of Q3 while open Fuddruckers grabbed 70 percent of last year’s sales.
Luby’s ended Q3 with 108 corporate restaurants—76 Luby’s Cafeterias, 31 Fuddruckers, and a Cheeseburger in Paradise.