Restaurants – Preparing for the Future

May 2020

While restaurants remain hyper focused on managing near-term liquidity and current operations, owners and managers are starting to shift their thinking toward what business will look like in the new “normal” as certain states begin to relax lockdown requirements.  The short- and long-term impact of the COVID-19 pandemic on the economy and consumers is still not known, in large part due to the uncertainty of the timing for a nationwide containment of the virus.  However, restaurants can leverage learnings from their initial reactions to government-mandated shutdowns and social distancing and implement initiatives to optimize their operations as stores start to re-open and quarantining is relaxed.  In addition, as certain states and countries relax measures at different times, learnings can be gained from those who re-open first.

Insights from China

Below are a number of insights and considerations for restaurants to consider which can help 1) position them for a successful rebound and 2) ensure their response narrative is attractive to future investors. Overarching themes that span all of these considerations include remaining true to your brand’s positioning, providing a safe environment for customers and personnel, and the continued digitization of the restaurant ecosystem by leveraging proven technologies to optimize all parts of restaurant operations.

Lincoln Insights into Assessing Ongoing Capital Needs

It has been well publicized that restaurants have been focused on analyzing their short-term cash positions and needs in what has been, and still is, a negative cash flow environment for the majority of the industry.  The Cheesecake Factory received a $200 million investment from Roark Capital in April 2020, and other public companies are also exploring potential capital raises.  In the middle market, lenders have so far sought to be collaborative with their borrowers as they seek to understand the longer-term impact of COVID-19 and the borrowers’ ability to service their debt.

Lincoln is available to assist you to address any and all capital implications from the disruption caused by COVID-19.  We have relationships with investors across the capital spectrum, understand the options available to restaurant operators and know the investor universe for all situations.  Understanding the available options allows operators and shareholders to make informed decisions in the best interest of the company and its stakeholders and can ensure business continuity in the near and long term as restaurants navigate the evolving operating landscape.  Having an open and transparent dialogue with lender(s) is encouraged to avoid any knee-jerk and unfavorable actions. We are seeing an uptick in engagements to assist borrowers with these discussions in addition to overall liability management.

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