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Restaurant Redux: Recession 2020 vs. Recession 2008

Jan 22, 2020

“Chief financial officers are bracing for a recession, cutting costs and hoarding cash to ride out an expected downturn ahead of next year’s presidential election, new research indicates,” the Wall Street Journal reported yesterday, citing a Duke University’s Fuqua School of Business survey.

The piece quoted a Duke business professor who noted that “CFOs say they are pursuing cost-reduction efforts, paying down debt, extending maturity schedules of their debt and locking in low interest rates to prepare for a potential downturn.”

The story reminded RTS Partner David Farkas of the remarks Bert Vivian, the former co-CEO who oversaw financials at P.F. Chang’s, made at a restaurant conference ten years ago during the Great Recession. David, then senior editor at Chain Leader, included them in the magazine’s blog. We’re reprinting his post here and letting you decide if history is about to repeat itself.

P.F. Chang’s “Victory”
January 13, 2009

In extemporaneous remarks, in which he invited audience members to interrupt him with questions, P.F. Chang’s co-CEO Bert Vivian today offered a forthright appraisal of his company’s chances of surviving the current recession. Vivian, who declined to offer much financial data or guidance, citing disclosure rules, told investors at Cowen & Company’s 7th Annual Consumer Conference that though “it might be a battle of the pygmies, we will be one of the folks standing.”

He added: “This is a time no one has seen before. It’s a great challenge for us.” Referring to casual-dining restaurants, he pleaded with investors not to “forget about us as a group” yet conceded that “nothing we see says that business will take off.”

Vivian, after serving as president since 2000 of the Scottsdale, Az.-based chain, was promoted to co-CEO last week, a title he now shares with longtime friend Rick Federico, who’s also company chairman. The two, who worked together at Brinker International in the ’80s and early ’90s, have shared day-to-day responsibilities for years — Federico, operations, and Vivian, financials.

To illustrate how chilled investor sentiment had become, Vivian pointed to steak chains. “You could could own the high-end steak business for $200 million. There are obscenely low valuations out there,” he said. By comparison, P.F. Chang’s market cap is $459.1 million.

Vivian added that despite slumping same-store sales (down 3 percent in the third quarter), the company’s cash was piling up, some $40 million this year. “Historically, we built restaurants with it,” he explained. But with development trimmed back to 5 to 7 new Bistro units in ’09, cash would flow elsewhere. “We’ll pay down debt and buy shares back. That will be a victory for P.F. Chang’s.”

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