Luby’s closes 8 restaurants; more planned

Houston-based chain has pulled the plug on 8 restaurants since May and plans to shut more under the same strategy

Houston-based Luby’s says it has closed and sold eight restaurants to help pay down its debts and plans to sell more as the chain struggles to compete in the fast-casual market.

Luby’s has shuttered and sold eight restaurants since May to pay down its debt amid lagging sales.

The Houston-based chain on Friday announced its real estate sales raised $11.6 million toward the company’s $39.5 million in outstanding debt. Luby’s, which owns most of its locations, plans to close and sell more restaurants to raise between $25 million and $45 million. At the same time, the company is working with investment advisory firm Cowen to refinance its debt.

“We believe positioning our company to have lower debt, improved same-store sales throughout our restaurant portfolio, and a lower overall cost structure will enhance our returns,” President and CEO Chris Pappas said in a statement.

The restaurant closures and sales come as Luby’s has struggled to compete with fast-casual restaurants that have grown in popularity among young adults and families.

Luby’s did not disclose how many restaurant it ultimately plans to close nor their locations. The chain operates 160 Luby’s cafeterias, Fuddruckers and Cheeseburger in Paradise restaurants nationally, according to its most recent quarterly earnings report.

The company reported $86 million in sales during the third quarter, down 3.1 percent from the same period last year. Samestore sales fell by 0.9 percent. Pappas attributed the sales decline to rising costs and lower guest traffic.

Luby’s, founded in San Antonio in 1947 and led by the Pappas brothers since 2001, isn't only closing restaurants to raise money to pay down its debt. Earlier this year, the chain announced plans to offer more meal discounts, invest in employee training programs and launch a new loyalty app to boost customer traffic.

And last month, the chain came to an agreement with Pappas to reduce his annual base salary to $1, from $500,000, according to federal filings.