BLMN Black BOOK
If history repeats itself the CEO will be fighting for his job!
When Starboard Value took a position in BLMN, we were short and covered our short. We will now deepen our thoughts into what might be possible with BLMN and present our findings on Friday, September 29th at 10 a.m. Other well-respected activists have taken a run at BLMN with little success. In summary, while it's uncertain what Starboard Value can accomplish that prior activists could not, their strong track record in the restaurant sector provides a reasonable basis for optimism. In our deck we will speculate on some ideas based on their past track record and other activist strategies:
EVENT DETAILS:
|
Strength in the Restaurant Sector:
Starboard Value has a history of successful activism in the restaurant industry. Their prior engagements with Darden Restaurants (DRI) and Papa John's (PZZA) resulted in significant changes that benefited shareholders. This specialized experience may give them an edge in implementing more effective strategies for Bloomin' Brands.
Different Focus Areas:
Starboard could take an entirely different approach from the past activists by focusing on areas not previously emphasized. For example, they may look into technological upgrades, marketing shifts, or menu optimization to enhance shareholder value.
Leverage Past Failures:
Starboard can review the measures proposed or implemented by JANA and Barrington, analyzing why those strategies did not yield the desired outcomes. This analysis could lead to more refined proposals backed by understanding what hasn't worked in the past.
Strong Negotiation Tactics:
Starboard has been known for its assertive negotiation strategies, which might lead to more significant changes in board composition or corporate governance than previous efforts managed. To this end, we don't think the current management team is up to the task.
Fresh Eyes:
Being a new entity with a fresh perspective can sometimes lead to innovative solutions to longstanding problems. Starboard's fresh set of eyes might identify opportunities or solutions that previous activists overlooked. To that end, Starboard has enlisted the expertise of a restaurant operations specialist to aid in revitalizing the company. Starboard announced that it has engaged Dave George—a former COO of Darden Restaurants—as an advisor for its investment in Bloomin' Brands. With nearly 17 years at Darden, George has served as the president of Olive Garden and LongHorn Steakhouse before ascending to COO. He retired in 2020 and is widely recognized as an authority in operational management.
Restaurant industry traffic
On yesterday's Monthly Consumables Digest (Click Here) call we broke industry traffic into eight segments with only three (Fast Casual, Pizza, and Coffee) saw positive traffic. The other segments are seeing declining traffic in ranked order QSR, Steakhouse, Breakfast, Entertainment, and last Casual Dining.
- Fast Casual – September MTD traffic was +6.5% versus 8.5% in August.
- Pizza – September MTD traffic was +5.6% versus 5.0% in August.
- Coffee – September MTD traffic was +4.1% versus 18.3% in August.
- QSR – September MTD traffic was -3.8% versus -0.5% in August.
- Steakhouse – September MTD traffic was -4.4% versus -2.2% in August.
- Breakfast – September MTD traffic was -8.5% versus -4.4% in August.
- Entertainment – September MTD traffic was -8.8% versus -9.7% in August.
- Casual Dining – September MTD traffic was -10.1% versus -5.1% in August.
If you would like a copy of the charts please respond to this email.
Looking at the broader industry:
QSR traffic improved significantly 250bps WoW to -4.5%. Sep MTD is now -4.8% or 235bps slower than Aug.
Casual Dining traffic improved 25bps WoW to -7.3%. Sep MTD is now -7.2% or 400bps slower than Aug.
RBI is buying some BK's
Burger King and several franchisees are buying Burger King restaurants from the bankrupt franchisee, Meridian Restaurants Unlimited. Out of 91 restaurants, 67 were sold in an auction for approximately $17.5 million. Burger King itself was the largest buyer, purchasing 29 restaurants in Utah and Montana for $4.4 million. Other franchisees, like KRAF Inc., Kansas King, Dakota Restaurant Partners, and Snake River Foods, also acquired various locations. The fate of the unsold restaurants remains uncertain, with some reportedly closing after the auction. Meridian had operated 120 restaurants before its bankruptcy in March, and it's suggested that just over half will remain open. Burger King faced challenges post-pandemic, with sales not growing as much as competitors like McDonald’s and Wendy’s. Meridian was one of two major operators that filed for bankruptcy this year. Burger King's strategy is now focusing on smaller operators with fewer, closely located outlets. The brand has seen recent improvements in sales and operations.
