More Fun to Come? Dave & Buster's Announces 2024 CFO Retirement
There are a few key things to note from this news about the upcoming CFO transition at Dave & Buster's. He is 54 and has only been with the company for one year. Based on the context, there does not seem to be much reason for concern about the timing or nature of the CFO's retirement. It appears to be a planned transition unfolding in an orderly way:
- This appears to be an amicable and planned retirement and will stay on for over a year to ensure a smooth transition.
- Quartieri played a crucial role in the recent acquisition and merger with Main Event, which positions Dave & Buster strategically in the experiential entertainment sector. Does he agree with the current financial strategy of buying back so much stock?
- The company is undertaking an executive search with an external firm to find a successor, suggesting they are taking steps to ensure solid financial leadership into the future.
- Comments from the CEO praise Quartieri's financial leadership and contributions to profitability, cash flow, and building a strong finance team.
Potbelly Activist Investor Calls for Decisive Action on Debt and Capital Allocation
PBPB has been the performing Restaurant stock over the past week and has significantly outperformed the S&P 500 over the past two years. Despite this, you could argue that management has failed Potbelly shareholders for too long, and more aggressive intervention by activist investors seems justified and likely to improve outcomes. The demands around debt, franchising, buybacks, costs, and leadership additions seem reasonable.
The Nierenberg's 13D reiterates its previous request that Potbelly either pay off its debt entirely or significantly pay it down. Specifically, it wants Potbelly to take this action after February 7th while securing an appropriate line of credit. The rationale is that Potbelly has the financial capacity to pay off its debt, even considering the 660,000 pre-payment penalty. Nierenberg notes that Potbelly neither needs to open additional company-owned shops nor develop new concepts (we agree). Instead, Potbelly should focus on growing its franchise shop base to 2,000 locations over the next 8-10 years. This will generate cash flow to fund share repurchases when the stock price dips below intrinsic value. To that end, Nierenberg urges Potbelly to implement a sizable share repurchase program and plan to take advantage of buying opportunities over the next several years. Additionally, it suggests Potbelly reduce corporate-level costs aggressively, including cutting unnecessary interest expenses, rebidding professional services, and shrinking the size of its 9-director board. Combined, these steps could potentially save over 4 million annually.
Kitchen Confidential: Restaurants Need Immigrants, But At What Cost?
The new Texas law highlights the industry's need to address its dependence on undocumented workers to build a legal, sustainable workforce. Pushing for federal immigration reforms is the best approach. Here is a summary of the key points and suggestions for the restaurant industry regarding the new immigration enforcement law signed by Texas Governor Greg Abbott:
- The new Texas law allows state and local authorities to arrest and deport undocumented immigrants found in the state. It takes effect in March 2023.
- Around 10% of the 12.4 million restaurant industry workers nationwide are estimated to be undocumented. In an open secret, restaurants knowingly hire undocumented workers.
- The law puts restaurants in a difficult position. They stand to lose needed workers but can't openly oppose the law without admitting to hiring practices that violate immigration laws.
- Opponents like the ACLU have filed a lawsuit challenging the constitutionality of the state law, as immigration enforcement falls under federal jurisdiction.
What can restaurants do:
- Support the legal efforts to overturn the Texas law to avoid the loss of undocumented workers.
- Advocate at the federal level for comprehensive immigration reform that provides reasonable pathways to legal work status. This would allow industries like restaurants to hire immigrant workers that businesses rely on legally.
- Implement better systems to verify the work eligibility of hires in the future while avoiding unfair discrimination.
- Be prepared for labor shortages in Texas and take mitigating steps like boosting wages and benefits to attract legal workers.
