Cracker Barrel is focusing on its “core businesses” in this time of uncertainty surrounding the coronavirus pandemic. Those businesses do not include Punch Bowl Social, a restaurant-entertainment concept that Cracker Barrel Old Country Store Inc. invested significantly in starting in July 2019. Cracker Barrel will not continue to invest in the concept, the company said.
Over the past few weeks, Punch Bowl Social closed its 19 units across the country as federal and state mandates and guidelines dictated. The brand has laid off most of its staff. The concept, which focuses on in-person experiences, is not pursuing off-premise alternatives, as many other restaurant brands have done.
Most of Cracker Barrel’s 664 restaurants and its 28 Maple Street Biscuit Company are operating off-premise only with no dine-in service; Cracker Barrel has not closed any stores to date, but this could change, according to an SEC filing made by the company on Wednesday.
“Unlike so many other companies, we are fortunate to have a strong balance sheet that we believe will allow us to navigate the uncertainties we face, but only if we are careful stewards of our resources and focused on the right things,” a spokesperson for Cracker Barrel wrote in a statement. “While Punch Bowl Social is a great concept, it was particularly challenged by recent events. We believe our employees, guests and shareholders will be better served if we dedicate ourselves to moving through the pandemic and readying our core business for an eventual recovery.
“As we disclosed in our public filings, we are focused on managing cash and dedicating all of our attention and financial resources to our core Cracker Barrel and Maple Street Biscuit company businesses so that we can emerge from the pandemic in the best shape possible. While our investment in Punch Bowl Social was substantial, we concluded that it would be in our best interest to write the investment off rather than risk further capital and distraction during this uncertain time.”
The company bought fast-casual Maple Street in October for $36 million. The deal Cracker Barrel struck with Punch Bowl Social was to invest up to $140 million to acquire an initial non-controlling stake from private-equity firm L Catterton.
When the company reports for the third quarter on May 1, it expects to record a $133 million impairment charge to cover its 58.6% stake in Punch Bowl Social.
Until recently, Cracker Barrel executives saw great potential in Punch Bowl Social and were looking to integrate the brand into the company’s portfolio. But like other entertainment-focused brands that thrive on a lively, social atmosphere, this pandemic has been devastating for Punch Bowl Social. In an SEC filing on Wednesday, Cracker Barrel announced it would stop investing in the brand as Punch Bowl Social faces foreclosure.
“In keeping with the Company's strategy to concentrate its resources on its core business during the pandemic, and in light of the substantial uncertainties surrounding the Punch Bowl Social business coming out of the pandemic, the company has decided not to invest further resources to prevent the foreclosure or otherwise provide additional capital to,” according to Cracker Barrel's SEC filing.
“From the start, many thought the pairing of Punch Bowl Social and Cracker Barrel was unusual,” said Robert Thompson, founder & CEO of Punch Bowl Social, in a statement. “We saw it differently—we recognized the possibilities and the opportunity to grow our brand with the support of one of the largest and most respected hospitality companies in the country. We find it difficult to judge the decisions made by anyone trying to survive the global COVID-19 pandemic. We are all navigating new terrain and doing our best to simply survive. Punch Bowl Social is continuing to collaborate with our lender, CrowdOut, and is working now to be in a strong position for our future re-openings, nationwide.”
Private lender CrowdOut, who has worked with Punch Bowl for two years, will continue to support the restaurant brand, according to a news release.
“None of us could have prepared for COVID-19, which has had, and will continue to have, massive economic and public health impacts across the world,” Thompson said in the statement. “The restaurant industry has been one of the hardest hit, and we were not immune. We have temporarily closed our locations and significantly reduced both our staff and operations in order to re-emerge on the other side of this global pandemic. In these turbulent times, we appreciate CrowdOut's support and are grateful for our strong and beneficial partnership, now and in the future.”
Contact Gloria Dawson at [email protected]
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