Wednesday, April 15, 2020 9:53:18 AM
The food quality issue, which has been more or less there for at least the last 20 years is due in large part to very poor management by the Pappas Restaurant group, which owns a large part of Luby's. Luby's prospered for many years because Bob Luby was an entrepreneur, not a bean counter. Cost control in any business is important, but cannot be the driving force behind a business. Only entrepreneurial thinking will increase revenues, which is ultimately what is needed for any business to prosper. Pappas Restaurant Group lacks entrepreneurial thinking, and they lack it in spades. Their solution to increase revenues was to buy Fuddruckers (dud #1) and then Cheeseburger in Paradise (dud #2) and load the company up with debt.
Given the decreasing revenues of the company I have questioned for several years whether the debt load was really serviceable in the long run or if Luby's was dying a slow death. It may not be a question much longer. With the COVID-19 problem Luby's has closed over half of the stores and the ones that are still open are probably not breaking even. While they have delivery and drive through to help during the crisis, I actually go in and order at the serving line when I get food to go, and I eat there 2-3 times a week right now. There is seldom anyone else in there when I go through the line. Luby's looks to me like a probable victim of the COVID-19 crisis unless they can reopen in the normal fashion pretty soon. It would also help mightily if it were possible to kick out the Pappas people. As I write this the news is the J.C. Penney is contemplating bankruptcy (no surprise there). Is Luby's soon to follow?
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