Restaurants In Trouble -- December 13, 2020

Updates

January 26, 2021; Cici's files for bankruptcy.

December 18, 2020: Exception:

Darden Restaurants: indicated annual yield of 1.03% paying 30 cents/share per quarter, today announced a dividend increase to 39 cents/share.

7 / 30 = 23% increase in its dividend. Link here. Record date, 1/8/21; payable date, 2/1/21.

Olive Garden; LongHorn Steakhouse; The Capital Grille; Seasons 52; Bahama Breeze; Yard House; Cheddar's Scratch Kitchen; Eddie V's. 

Trading near it's 52-week high.

Original Post

There are approximately 70 restaurants on this list (I counted 67 but did not double-check, so somewhere between 65 and 75). Look at the list. 

Name the one prominent national restaurant that is not on this list. There are several well-known, prominent, nationwide restaurants not on that list but not many.

One restaurant chain that is not on the list surprises me: Cracker Barrel.

Going through this list, observations and the tea leaves suggest:

• many of these chains were doomed even before Covid-19 (Hooter's, e.g);
• many of these chains were dying before Covid-19 but might have survived with a "white knight" savior, but Covid-19 will be the final nail in their coffins;
• many of the "national" chains that survive will become regional brands; some already are, always have been, but more will join the list (Sonic, Cracker Barrel, e.g.);
• the national restaurants that survive will take a bigger share of the overall market simply because there will be less competition.
  

For investors: this has huge implications for "sandwich delivery companies," (as one reader calls them), namely DoorDash. 

DoorDash will not save even one of those restaurants on that list. If the restaurants survive, they will survive through a number of innovations including delivery, but delivery won't, by itself save restaurants.

The big reason that DoorDash won't save these restaurants: simply not enough time. These restaurants have been decimated since March, 2020, and it looks like another three months in states like California and New York. 

And if these restaurants don't survive, it's hard to make a case for DoorDash as an investment. Where can DoorDash grow? Perhaps by becoming the delivery choice for existing patchwork of pizza delivery chains. 

Amazon started out as a bookseller. Now Amazon sells "everything."

DoorDash will need to become the Amazon of local delivery: delivering for Walmart, Target, local grocery stores, and all the other local brick-and-mortar stores. 

But wow, that list of 67 restaurants.

For investors: a focus on those restaurants that will survive. Think McDonald's. 

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