Harry Luby opened the first Luby’s Cafeteria in Dallas in 1929. Son Robert Luby worked for his dad before opening his own restaurant by the same name in Corpus Christi. After serving in the military during World War II, Robert Luby established the Luby’s Inc. restaurant chain. Courtesy photo
Luby’s is for sale. The Houston-based restaurant company announced June 3 it is selling one or maybe more of its three chains, which includes Fuddruckers and Cheeseburger in Paradise. Selling Luby’s is just one of several options the company has to keep the restaurants open for business. Other options include selling its operating divisions and real estate — the ground under the Luby’s cafeterias — or selling the entire company.
Duff & Phelp’s Securities of Chicago is handling the Luby’s and Cheeseburgers in Paradise sales, while Brookwood Associates of Atlanta will handle the Fuddruckers sale.
“This path provides for the potential to place the restaurant operations with well-capitalized owners moving forward,” Luby’s CEO and President Christopher J. Pappas said is a media release.
Founded as a chain in San Antonio by Robert Luby in 1947, Luby’s originally offered cafeteria-style home cooking from fresh foods — the first fast-casual restaurant in what has now become a trend in chain restaurants. Although COVID-19 restrictions hurt the chain, troubles began as early as 1997 when a new CEO replaced its made-from-scratch menu with pre-made and frozen ingredients. A return to its original business plan a few years later has not fully repaired the damage.
Along the way, the company acquired Fuddruckers, a dress-it-yourself hamburger chain, and Culinary Contract Services, owners of Cheeseburger in Paradise.
Luby’s began selling property in 2018 to help strengthen its bottom line. Last September, a committee was formed to develop a strategy for maximizing shareholder value.
Numbers showed a slight increase in revenue for the first 12 weeks of the year, which ended March 12 just before COVID-19 shutdowns. On-premise dining was suspended March 17. By the end of that month, the restaurant had furloughed more than half of its corporate and administrative staff and cut the salaries of everyone else.
Currently, Luby’s restaurants sales are at about 75 percent of its pre-pandemic levels.
"We revamped restaurant operations to generate cost efficiencies resulting in higher restaurant operating margins even if sales levels do not return to pre-COVID-19 pandemic levels," states the company’s current quarterly report.
Criticized for applying for and receiving $10 million in Paycheck Protection Program loans approved by Congress in the first COVID-19 stimulus bill, Luby’s defended its need for funds. PPP loans were earmarked to help small businesses pay employees, even if doors were closed to customers during the pandemic. The PPP, however, provided an exemption for restaurants, food services, caterers, and hotels with fewer than 500 employees per location.
While the company is for sale, it is also in danger of being delisted from the New York Stock Exchange. It has six months from April to bring its stock prices up to an acceptable level for the NYSE.
The two Luby’s restaurants in Corpus Christi have remained closed because of the COVID-19 pandemic. The Fuddruckers at 1949 South Padre Island Drive is open for dine-in services at 50 percent capacity. As of June 12, restaurants will be allowed to open to 75 percent capacity.
For the latest news on COVID-19, visit CCBizNews.com/covid-19. If you think you have the coronavirus, contact the Corpus Christi-Nueces County Public Health District at 361-826-7200, and a representative will give you instructions. Check the city’s webpage for more information.
