Restaurant chain operator Shakey’s Pizza Asia Ventures Inc. is holding off the rollout of new stores and cutting by half its capital outlays this year to prepare for a prolonged period of tough operating environment arising from the coronavirus pandemic.
Shakey’s has likewise shelved any discussion on offshore franchising but is not closing its doors to the acquisition of restaurant brands that may be up for grabs at attractive valuations during this difficult period.
The Po family-led restaurant group is originally targeting 38 new store openings this year, only one of which had been opened in the first quarter.
“On new stores—what was supposed to be a record-breaking year in terms of organic expansion has now been put on pause. Prudence dictates that we review both our existing store network, as well as our planned expansion strategy amidst the economic uncertainties brought about by the crisis,” Shakey’s president Vicente Gregorio said during the company’s stockholders meeting on Wednesday.
From an original capital spending budget of P600 million for this year, capital outlays will be reduced to P250 million to P300 million, most of which had already been disbursed in the first few months of the year.
“Recovery of our business is maybe 55 percent of pre-COVID business, so we are still very much focusing on preserving cash and tightening our belt by operational streamlining. The focus is to weather the storm,” Shakey’s chair Christopher Po said.
“In the meantime, opportunities are presenting themselves. We are not closing our doors to these. If something really attractive comes at a very attractive valuation, it will force us to really take a hard look. But the priority right now is to ride the ship and bring the Shakey’s and Peri-peri operations to safe harbor,” he said.
As of end-June, 267 stores or 95 percent of the group’s network have reopened for business, rising from only 24 operational stores at end-March. Recovery of foot traffic, however, has been slower than expected even now that the government has allowed dine-in operations to resume.
“The fear of the consumers to dine in is still very strong and latest data showed only 15-20 percent of previous dine-in sales [that] have been recovered,” Gregorio said.
On Shakey’s overseas footprint, two out of four stores in the Middle East have been shut down. “Whether permanent or not, it remains to be seen,” Gregorio said, adding that the group had also suspended discussions on new overseas franchise deals to focus on business in the Philippines.
He said the group was preparing for the possibility that things might not return to normal until 2022 or 2023.
However, he said this crisis would be an opportunity for Shakey’s to reevaluate its business model, strengthen contingency planning and make sure the enterprise was sustainable and ready to meet those problems.