Great ResignationInflationSupply ChainsLeadership

Bob Evans to Close 27 Underperforming Restaurants

April 25, 2016, 3:37 PM UTC
Michael Houghton — Bob Evans Farms

Bob Evans Farms is moving to close 27 underperforming restaurants, a move that comes after the casual dining chain reported a weaker profit for 2015.

A bulk of the Bob Evans Restaurants being shuttered, 21 in total, are owned by the company and closed over the weekend. The remaining six locations are leased and will be closed throughout fiscal 2017. Bob Evans (BOBE) said it estimated it will incur $7.5 million to $8 million in expenses related to the charges, though it also anticipates to generate about $20 million in proceeds from the sale of the owned properties.

President and CEO Saed Mohseni said the performance at the restaurants that are closing “was not meeting expectations.” The company intends to offer positions to employees at nearby locations when possible. If relocation isn’t an option, Bob Evans will pay laid off staff severance benefits.

The restaurant closures only affect a slim number of stores that Bob Evans operates. The chain, which operates in 19 states primarily in the Midwest, mid-Atlantic and Southeast, operates 548 restaurants. Unlike many casual dining restaurant concepts, Bob Evans also has a fairly large food products segment–though a bulk of revenue still comes from the restaurants.

The closures come at a time when casual dining chains like Bob Evans find themselves challenged by the faster growing fast-casual segment. As traffic migrates to those concepts, which serve fare that is a step up from the fast-food industry but without table service, it can hurt demand at chains like Bob Evans.

Lately, Bob Evans has still managed to report fairly slim sales gains. Most recently, annual sales increased to $1.35 billion last year from $1.33 billion. But profitability has been a greater challenge. Fiscal 2015 net income slipped to $16.6 million in 2015 from $33.7 million the year earlier.