Last month, California Pizza Kitchen filed for bankruptcy, and now a new report is shining a light on the financial health of other popular casual restaurants.
Dave & Buster's, Denny's and Bloomin' Brands, which owns Outback Steakhouse, were the top three publicly traded restaurant brands with the highest risk to default on their loans, according to a new report from S&P Global Market Intelligence.
"The odds that the largest publicly traded U.S. restaurants will default fell in recent months as states allowed businesses closed by the coronavirus pandemic to reopen,” the report said. “But the ongoing financial hits from the virus and uncertainty over whether laid-off consumers will receive expanded unemployment benefits continue to pressure the industry as more companies enter bankruptcy.”
When a business is unable to pay its creditors, leaders must make tough decisions, such as closing some locations, filing for bankruptcy protection or even liquidating their assets. While the three brands were called out in the report as the most likely to default, their risk has moved away from the danger zone since April at the height of the pandemic.
The S&P report lists Dave & Buster's at a 16.1% likelihood of defaulting, Bloomin' Brands at 13.2% and Denny's at 11.9%.
A representative for Dave and Buster's did not immediately respond to a request for comment.
In a note to investors in June, the gaming and dining company's CEO Brian Jenkins said he was confident Dave and Buster's would weather the difficulties caused by the pandemic.
“While still early and with many variables that are beyond our control, we are confident that we are taking the right steps to rebuild our business and emerge from this challenging time," Jenkins said.
Elizabeth Watts, spokeswoman for Bloomin' Brands, told TODAY Food in an email that the report "mischaracterizes our strong financial health and recent sales performance."
She said the company has more than $500 million in the bank, "solid sales with positive cash flow" and a takeout and delivery business that is popular with customers.
Denny's, which shuttered 15 locations back in June, said in a statement that the restaurant chain is "proud of the work we have done throughout this pandemic to navigate the ever-changing economic landscape brought on by COVID-19."
"We look forward to continuing our momentum during the current challenges and remain optimistic about the strength of our brand and the results we fully expect to see as we adapt to the changing landscape together," read the statement.
The Cheesecake Factory and Dine Brands Global, which owns Applebee's and IHOP, rounded out the top five list of restaurants with the highest chance of defaulting. A representative for The Cheesecake Factory declined to comment.
Steve Joyce, CEO of Dine Brands, told TODAY in a statement that the restaurant group is confident about its long term outlook.
“We’ve demonstrated the ability to manage our business during a challenging second quarter, and our restaurants proved their tremendous resiliency in meeting the convenience and safety needs of our guests," he said. "We remain optimistic about the overall marked improvement in industry sales and traffic data since April, and are confident in our long-term strategy and ability to quickly adapt to the ever-changing industry landscape.”
CFRA Holdings, an IHOP franchisee that runs 49 restaurants across Virginia, North Carolina, South Carolina and Tennessee, filed for bankruptcy on May 6 and closed all of its locations.
Before the coronavirus shutdowns, casual dining was already facing increased competition from fast-casual restaurants, where people can order at a counter instead of being served by waitstaff.
On the other hand, the companies least likely to default, according to the report, included fast casual chains Chipotle, which was given a 0.1% likelihood and Wingstop, which was given 0.5%. Fast-food giant McDonald's was also rated low-risk at 0.4%.
EDITOR'S NOTE (Aug. 14, 2020 at 1:30 p.m.): This post has been updated to include a statement from Denny's.