Bob Evans Farms Inc. plans to close 20 underperforming restaurants following a comprehensive review of its restaurant portfolio, the company said Wednesday.
Bob Evans plans to close the restaurants over the next 12 months, but the majority of the locations will be closed by the end of May.
“Closing a restaurant is a difficult decision, as it directly impacts our guests and employees,” Bob Evans CFO Mark Hood said in a statement. “These restaurants, however, despite efforts to improve performance, were not meeting expectations.”
Hood said the company would offer employees jobs at other Bob Evans restaurants and severance packages to those who cannot relocate.
The restaurants generate $20 million a year in revenue, but by closing the locations Bob Evans expects to generate operating income of $2.5 million to $3 million a year, suggesting that the restaurants average $1 million a year in sales and $150,000 a year in operating losses.
The company owns 16 of the 20 restaurants and plans to sell the properties immediately. It expects to generate as much as $17 million in net proceeds from the sale.
Bob Evans expects the closures to cost $4.7 million to $5.2 million, with $2.1 million of that in non-cash charges.
Since activist investor Sandell Asset Management won four seats to the company’s board last year, Bob Evans CEO Steve Davis has resigned and the company started looking for a permanent replacement. Hood and Mike Townsley, president of the packaged foods division, BEF Foods, are serving as interim co-CEOs.
The company is also examining options for its real estate holdings, as called for by Sandell, but it has decided against a potential sale of BEF Foods.
Bob Evans’ stock has fallen more than 17 percent on the year. In March, the company reported an operating loss of $2 million during the third quarter ended Jan. 23.
Bob Evans then announced plans to eliminate its discount strategy and change its menu to highlight higher-margin items. It also planned to remove slower-selling items from the menu.