SBUX & Delivery
Have you ever had coffee delivered? I have not, nor do I want to, but some people see it as a viable alternative.
SBUX has been testing ghost kitchens in China since '19 and, over the past three months, has been operating out of a Culver City, CA, CloudKitchens facility on DoorDash & UberEats apps. It is currently the sole U.S. test location and offers a full SBUX menu. Delivery is important to Starbucks' omnichannel strategy, accounting for just under a quarter of Q3 sales in '22, up 35% YoY. Rather than rent a full kitchen, it has set up equipment in the break room of the CloudKitchens facility with a minimal footprint. A low CAPEX way for SBUX to grow in the U.S.
BROS
DPZ has convenient the street that the fortress strategy was important for the business model to lower costs and increase delivery times. BROS has strong AUV's despite aggressive fortressing, but the strategy differs from DPZ and is more like SBUX. The company uses the strategy to balance service times and capture increased market share.
BROS rallied 6.5% on Monday after updating guidance ahead of a presentation by the restaurant operator at the ICR Conference in Orlando, Florida. For 2023, Dutch Bros. (BROS) targets 150 new shops, which is said to position it to achieve a five-year goal of 800 systemwide shops by year-end. BROS also said that it is in striking distance of $1B in revenue in 2023 and 1K systemwide shops by the first half of 2025. Formal guidance for 2023 revenue of $950M to $1.0B vs. $976M consensus. For 4Q22, BROS said it opened 30 new shops, of which 26 were company-operated. System same-shop sales declined 0.6%, inclusive of the impact of its fortressing strategy, which resulted in sales being transferred from existing shops to new ones. Company-operated same-shop sales declined 2.1%, inclusive of the impact of the fortressing strategy. CEO update: "For a third year in a row, we've exceeded our new shop development targets, doubling our shop count since March 2019, despite unprecedented disruption to communities and the economy. As we continue our 30+ year growth journey, we're entering 2023 from a strong position supported by a robust new unit pipeline, building market share in existing markets, and growing our people systems." As of December 31, the Dutch Bros system consisted of 671 shops (396 company-operated and 275 franchised-operated) across 14 states.
DENN
The old school thought on this company is that there are a few reasons to be optimistic.
DENN rallied on Monday after posting guidance ahead of a presentation at the ICR Conference. The restaurant company said on a preliminary basis that 4Q22 domestic systemwide same-restaurant sales rose 2.0%, including a 1.7% increase at domestic franchised restaurants and a 6.0% increase at company restaurants. That matched the consensus expectation of analysts. For the fiscal year, DENN domestic systemwide same-restaurant sales grew 6.3% compared to the equivalent fiscal period in 2021, including a 6.0% increase at domestic franchised restaurants and a 10.4% increase at company restaurants. The company expects adjusted EBITDA to land between $21M and $23M. The company plans to release full Q4 results on February 13. Looking ahead, the restaurant operator said it is focused on increasing staffing levels, extending operating hours, and upholding its commitment to everyday value in the near term.
MCD
On Monday, the U.S. Securities and Exchange Commission (SEC) said it had charged former McDonald's CEO Stephen Easterbrook with making false and misleading statements about his termination from the fast-food giant. McDonald's Nov. 2019 fired Easterbrook for violating the company's policy over a relationship with an employee. Easterbrook, at that time, had called the relationship "a mistake." The SEC on Monday also charged MCD for shortcomings in its public disclosures related to Easterbrook's separation agreement. "McDonald's and Easterbrook entered into a separation agreement that concluded his termination was without cause, which allowed him to retain substantial equity compensation that otherwise would have been forfeited," the SEC said in a statement. According to the SEC's order, Easterbrook also "knew or was reckless in not knowing" that his failure to disclose other relationships with additional MCD employees before his termination would influence MCD's disclosures to investors related to his departure and compensation. Easterbrook consented to the SEC's cease-and-desist order, which imposed a five-year officer and director bar and a $400K civil penalty, and did not admit or deny the SEC's findings. McDonald's also consented to the SEC's cease-and-desist order. Still, they will not be charged any monetary penalty as they substantially cooperated with the SEC's staff during its investigation. The company also did not admit or deny the SEC's findings.
