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Luby’s reduces Cheeseburger in Paradise unit count

Luby’s reduces Cheeseburger in Paradise unit count

Company rebrands some locations as Fuddruckers

Luby’s Inc. has continued to whittle down its Cheeseburger in Paradise holdings, which it bought as a 23-unit brand in December 2012.

Houston-based Luby’s, which owns namesake cafeterias and the Fuddruckers brand, had eight remaining full-service Cheeseburger in Paradise restaurants at the end of the fourth quarter on Aug. 27.  Two Cheeseburger in Paradise units remain in Maryland, and one each is left in Florida, Indiana, Nebraska, New Jersey, South Carolina and Virginia.

“The eight Cheeseburger in Paradise locations that are in operation today have always been the top performers for the brand, and we remain dedicated to supporting these restaurants to achieve financial and operational success,” said Chris Pappas, Luby’s president and chief executive, in a statement.

When Luby’s bought Cheeseburger in Paradise for $11 million from a private investment group in 2012, Pappas said the locations were “in high-traffic areas, many near successful malls and tourist attractions.”

The brand had already shed a number of units before Luby’s purchase. In 2006, Cheeseburger in Paradise had 38 locations in 17 states.

Scott Gray, Luby’s chief financial officer, said in an earnings call with analysts that of the 15 Cheeseburger in Paradise units closed in the past year, three have already been converted to the Fuddruckers brand “and six more are closed for future reopening as Fuddruckers.”

Two of the conversions were in Illinois and New York, with traditional Fuddruckers line service, and the third, in Virginia, was opened as a waiter-service restaurant, which Pappas said was “an extension of the brand.”

Six of the Cheeseburger in Paradise units are closed permanently and the company will dispose of the assets, Gray said.

Pappas said the Cheeseburger in Paradise units weighed on profits.

“From a profitability standpoint,” Pappas told analysts, “Cheeseburger in Paradise masked the sustained good performance at our core Luby’s Cafeteria brand, where store-level profit margin grew by 30 basis points.”

Cheeseburger in Paradise reduced Luby’s total company profitability by $2.3 million on an after-tax benefit basis, he said.

This week, the Cheeseburger in Paradise division announced a number of seasonal holiday promotions to bolster delivery and catering options.

For groups of 10 or more, Cheeseburger in Paradise is offering per-person pricing starting at $8. For delivery with minimum $150 orders, Paradise Platters range from 24 traditional wings for $19.99 to two dozen sliders for $45.99.  Three salad varieties — Malibu, Calypso and Sailor — are priced at $64.99 for a small size that serves up to 10 and a large for $124.99 for as many as 20 guests.

Pappas said Luby’s will focus on its co-located Luby’s-Fuddruckers units, which he said is the “strong growth engine for the company.”

Luby’s started the fiscal year with one combo unit and ended with five. The one Houston combo location that was in a same-store comparison showed a 3.8-percent increase for the quarter and a 5.1-percent increase for the year, the company said.

“These locations, in the aggregate, are meeting our sales expectations, but they require additional labor and other costs in initial weeks of operation,” Pappas noted.

The sixth combo unit, and the first outside Texas, is under construction in Jackson, Miss., he said.

On Nov. 10, Luby’s reported a loss of $1.4 million, or 5 cents per share, in the fourth quarter, compared with a $429,000 profit, or 2 cents per share, in the prior-year quarter. Revenue rose slightly, to $123.6 million, from $123.3 million in the same period a year ago.

The company reported that same-store sales rose 0.4 percent at Luby’s Cafeterias in the fourth quarter and fell 4.6 percent at Fuddruckers. For the full year, same-store sales increased 1.4 percent at the cafeterias and decreased 3.5 percent at Fuddruckers, the company reported.

In addition to the eight remaining Cheeseburger in Paradise units, Luby’s also owns and operates 94 cafeterias, 71 Fuddruckers restaurants, and one Bob Luby's Seafood Grill. The company also franchises 110 Fuddruckers locations in the United States, Puerto Rico, Canada, Mexico, Italy and the Dominican Republic.

Luby's Culinary Services division provides foodservice management to 25 healthcare, higher education and corporate dining locations.

Contact Ron Ruggless at [email protected].
Follow him on Twitter: @RonRuggless

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