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FirstFood Global Restaurants, Inc. – Turnaround Plans of BRAVO! Cucina Italiana and BRIO Tuscan Grille Parent Company Get 86-ed by COVID 19; Lease Rejections and Sale on Near-Term Menu

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April 10, 2020 – FirstFood Global Restaurants and seven affiliated Debtors (“FirstFood” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Middle District of Florida, lead case number 20-02159. The Debtors, the parent company of the BRAVO! Cucina Italiana and BRIO Tuscan Grille restaurant groups, are represented by R. Scott Shuker of Shuker & Dorris, P.A.

The Debtors’ lead petition notes between 1,000 and 5,000 creditors; estimated assets between $10.mn and $50.mn; and estimated liabilities between $10.0mn and $50.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) Gordon Food Service ($1.3mn trade debt), (ii) Wasserstrom Company ($677k trade debt) and (iii) Anthem BCBS ($474k trade debt).

In May 2018, Bravo Brio Restaurant Group, Inc. (then NASDAQ: BBRG) was acquired via merger by Spice Private Equity Ltd. (listed on the SIX Swiss Exchange (SPCE)), a Swiss affiliate of Hamilton, Bermuda based private equity group GP Investments, Ltd. and renamed FoodFirst Global Restaurants. In a press release announcing the acquisition, GP Investments advised that the they had paid approximately $100.0mn to acquire Bravo Brio’s equity.

In late March of this year, the Debtors announced that they were temporarily closing 71 of its 92 locations in the U.S. due to the COVID-19 crisis; with the balance reduced to serving a limited carryout menu and run by skeletal staffs. At the time, the Debtors furloughed 6,000 workers but warned that if the COVID-19 virus continued, things would get worse. That has now happened. 

"The mandated dining room closure orders wiped out 60% of our restaurants within days and since then we have experienced nothing short of devastating sales declines," the Debtors’ recently hired CEO Steven Layt (formerly CEO at NPC International’s Pizza Hut operations) said in a statement.

The COVID-19 outbreak could not have come at a worse time for the company continued Layt in an interview describing his efforts to put the final touches on a turnaround plan for the company that involved renegotiating leases with landlords where rents were too high; re-evaluating the menus at both brands; optimizing the supply chain; and simplifying kitchen operations.

“Everyone was feeling bullish about the future,” he said. “Then the rug got pulled.”

Events Leading to the Chapter 11 Filing

The Debtors' case management summary provides an overview of the events leading to the Debtors' Chapter 11 filings and details a restaurant business that was over-expansive and under-sensitive to changing customer trends (eg the rise of "quick-service and fast-casual options") long before COVID-19 delivered its lethal blow. Between 2017 and 2019 revenues dropped from $400.0mn to $307.0mn as the Debtors experimented with new strategies and began closing underperforming restaurants in the hope of turning things around. In January 2020, the Debtors hired a former CEO of a large Pizza Hut franchisee in its most recent efforts to address operational shortcomings; but COVID-19 has precluded the Debtors from advancing this latest "improvement process." The case management summary also flags the Debtors' Chapter 11 intentions; "reject a significant number of leases in the very near term" and "pursue a company sale." 

The summary provides: "When acquired [in May 2018], Brio and Bravo operated 110 locations in 32 states across the country reporting annual sales of more than $400 million for 2017 with nearly 10,000 employees.  

From 2006 to 2010 the Restaurants underwent substantial expansion reaching 28 states with 85 total locations, including 47 Bravos and 38 Brios. The expansion required significant amounts of debt, some of which carried costly terms. Leadership offered a public primary offering of shares to raise $140 million in 2010 to satisfy existing debt and fuel additional growth. At the end of 2013 there were 107 Restaurant locations.

The expansion decelerated as both customer preferences and the industry changed. The rise of quick-service and fast-casual options resulted in consistent customer declines at the Restaurants between 2013 and 2018. Prior leadership experimented with different concepts to attract new customers but was unable to find the right model to substantially fuel the growth leadership expected. In 2017, five underperforming Restaurants closed due to early termination clauses or expiration opportunities.

FoodFirst took the Restaurants private in 2018 to rebuild and refresh the brands with the expectation of continuing to expand across the country and internationally. Corporate headquarters moved from Columbus, Ohio to Orlando, Florida to take advantage of the thriving economy, a culture of innovation, the diverse community, and substantial international tourism. Leadership implemented newly crafted Italian Mediterranean inspired menus at the Restaurants. Renewed attention toward enhancing food quality and operational efficiencies, as well as remodeling the Restaurants were expected to significantly enhance profitability.

Unfortunately, the changes did not yield the results expected. Annual sales at the end of 2019 were $307 million, significantly below expectations…labor costs, employee turnover, and a substantial number of poor and under-performing Restaurants reduced overall sales volume and profitability.

FoodFirst sought out new leadership to implement additional efforts to return the Restaurants to greater profitability and potential expansion. Steven R. Layt, ('Mr. Layt'), took on the roles of CEO and COO on January 28, 2020. Mr. Layt’s restaurant experience dates back to 1992. His most recent position was President and CEO of the Pizza Hut Division of NPC International.

However, the improvement process was radically altered due to the current international health crisis, (the 'Pandemic'), creating massive restaurant closings and employee losses throughout the country via state ordered shelter-in-place requirements, which exacerbates the need to reduce the Restaurants’ footprint in order to maintain the strongest and most viable locations.

Leadership will continue reviewing underperforming locations for potential closure and/or sale where appropriate. FoodFirst expects to reject a significant number of leases in the very near term. There are more than seventy Restaurants with leases expiring between 2021 and 2028. Approximately twenty Restaurants have leases expiring in 2020. FoodFirst will continue to closely monitor the Restaurants performance during the Pandemic and the assorted State shelter-in-place orders to determine which locations remain viable.

The Pandemic is creating enormous disruption throughout the economy, and the restaurant industry as a whole is especially effected. FoodFirst’s difficult position prior to the Pandemic makes its current situation even more precarious. In order to save jobs and the viable Restaurants it will be necessary to pursue a company sale and an accompanying Management Services agreement.

About the Debtors

According to the Debtors: “FoodFirst Global Restaurants is the proud parent company for two of America's most popular Italian restaurant brands. As a private company, we are in a strong position to refresh these brands, expand the number of locations in the future and invest in the long term profitable growth of our company going forward.

FoodFirst Global Restaurants was formed in 2018 by leading investment firm GP Investments, Ltd and a group of talented entrepreneurial investors. At FoodFirst Global Restaurants, we are relentlessly focused on the quality of our food and ensuring our guests have a consistently outstanding experience. We accomplish that by driving a world class culture with our people who care deeply about our Mission and live our Values."

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The post FirstFood Global Restaurants, Inc. – Turnaround Plans of BRAVO! Cucina Italiana and BRIO Tuscan Grille Parent Company Get 86-ed by COVID 19; Lease Rejections and Sale on Near-Term Menu appeared first on Daily Bankrupt Company Updates | Bankrupt Company News.


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