Logan’s Roadhouse Inc. expects to emerge from bankruptcy in November after renegotiating leases, shedding $300 million in debt and closing locations that dragged down profits.
That’s according to a memo to employees from Logan’s Roadhouse chief restructuring officer NishantMachado, and shared with Nation’s Restaurant News, that details the company’s plans for emerging from bankruptcy.
The memo follows the closure of 34 of the chain’s 256 restaurants since the company filed for federal debt protection in July. While calling closures “always difficult,” Machado said they were necessary to enable the company to move forward.
“This was necessary to build a stronger future for the company and for all of you,” Machado wrote. He noted that, “The closing of under-performing units has shifted the company’s [average unit volumes] up, reduced average occupancy costs and increased profitability significantly.”
By closing underperforming units, Logan’s Roadhouse has been able to move managers to better performing locations “that will allow them to be more successful,” he noted.
Logan’s Roadhouse filed for credit protection in August, with $416 million in debt. The company had revenue of $606.4 million last year, but earnings before interest, taxes, depreciation and amortization were negative $112 million.
The company blamed problems on weakening sales in the restaurant industry, particularly in the casual-dining segment. Traffic fell 9 percent in the first half of the year.
The filing came amid a wave of bankruptcies. Since November, 10 restaurant operators, including Logan’s Roadhouse, have sought debt protection. Several companies that filed had previously filed for bankruptcy.
Logan’s Roadhouse plans to restructure its debt, rather than put itself up for sale. The company has a strategy it says will help it emerge from debt protection in November with a stronger balance sheet.
In the memo, Logan’s Roadhouse said it has a long-term bonus and incentive program for workers that will be rolled out in 2017. Last month, the company asked the court for permission to pay bonuses to company executives and employees to ensure they stick with the chain through the process.
The incentive program comes amid an increasingly competitive labor market for many restaurants.
Logan’s Roadhouse also expects to shave $300 million off its debt. Much of the company’s problem in recent years has been debt payments. In the third quarter last year — the last quarter in which the company submitted an earnings report — Logan’s Roadhouse had $12.4 million worth of interest payments, roughly half of the company’s $24.4 million loss that quarter.
Machado said in the memo that Logan’s Roadhouse plans to reinvest in its restaurants, and improve quality and execution. The chain is testing a refined menu in 17 locations “to improve execution and to focus on core products that has made Logan’s successful.”
He also said the company is working on a rebranding effort “that will differentiate Logan’s in a crowded space and provide the company with a unique identity that resonates with our guests.”
The initiative will include a television ad and an integrated marketing campaign in late October.
“We have 30 million diners that we serve each year, and we are committed to serving them,” Machado wrote.
“Logan’s is a special brand with tremendous potential,” he added. “We have built a strong following, and it is our responsibility to take care of that guest, value that guest and continue to build on that platform. Our plan does exactly that, and we have already started to see progress.”