Given what restaurants have seen so far in 2020, “if somebody told me aliens had landed, instead of being surprised I’d say, ‘Oh, really? What time? And do you think they’d be interested in investing in Punch Bowl Social?’” says Robert Thompson, CEO and founder of the mothballed 20-unit concept.
“We just had a $3 billion market cap strategic partner walk out the door on us and we survived that, so nothing actually scares us anymore,” Thompson said during his appearance this week on “A Deeper Dive,” the podcast hosted by Restaurant Business Editor in Chief Jonathan Maze.
That strategic partner was Cracker Barrel Old Country Store, which informed Thompson on March 16 that it would not invest further in Punch Bowl Social after buying a minority stake for $140 million just one year earlier. Punch Bowl was still viewed as one of the industry’s hottest concepts. Now the industry was learning that the much-ballyhooed brand had already defaulted on its loans and was facing foreclosure by its principal lender.
The vote of no-confidence came as restaurant dining rooms were being closed by state after state to slow the spread of COVID-19. Many full-service concepts could recast themselves as takeout and delivery options, but on-premise service was the only viable sales channel for Punch Bowl, a collection of 24,000-square-foot indoor playgrounds for millennials and Gen Zers.
“It came as a disappointment but not as a surprise,” Thompson said of Cracker Barrel’s decision. “Cracker Barrel is a 50-year-old company and they made a choice to shrink their perimeter and protect their core brand. I do not begrudge them the choice that they made. This was an existential crisis for many brands.”
Still, without a capital infusion, 10-year-old Punch Bowl could have been done.
“From 9 a.m. to 11:30 a.m. on March 16, I kicked everyone out of my office and I closed the door,” recalls Thompson. “I sat there and tried to figure out what my next moves were for the company. The path we’re on now was the only play. It became easier, to just put my head down and get back to work.”
That path was meeting with private-equity investors and high-net-worth individuals looking to back a self-described growth concept that has been dark for three months. It also lacks the 2,300 employees who were let go on March 16.
“The universe has a way of making sure you never get too comfortable,” says Thompson.
Still, he voices confidence that the needed money will be found. Punch Bowl’s good press, fresh image and reputation as a progressive company “has created a groundswell” of interest from well-heeled parties, he told Maze.
“Look, unless a meteor hits this planet or dinosaurs come back out of the earth and eat me, there is a high likelihood that this brand is going to be here tomorrow,” he remarked during the broadcast. Indeed, the veteran restaurateur insists he’s enjoying the process of finding a lifeline.
“This is not the first existential threat we have faced. I don’t know if it will be the last,” he says. “For me, this is just another street fight on to the way to the ultimate goal.”
He acknowledges that the current state of the industry poses some biblical misfortunes. “It’s a challenge for all of us, let’s be clear,” Thompson says.
All 20 Punch Bowls are currently closed, and Thompson was unable to sway the landlords of two sites to think long term, resulting in the permanent shutdown of those locations.
“We’d lose more money if we were open than if we were closed,” he says.
He acknowledges that reopening won’t be easy or inexpensive, but is quick to add that fast startups are a core strength of his operation. He anticipates sending teams into a market to reopen a property or two, most likely in Texas and Georgia, and then learning from the experience before hopping to the next pair of second-take grand openings.
On the bright side, “82% of millennials and Gen Z are excited to immediately come back to large social gatherings--that’s my core customer,” Thompson says. “Now, they’re all going to have less money because we’ll be in a recession. It’s going to be rough for the rest of 2020. But in 2021, the emotions can wash over us.”
The challenge peculiar to Punch Bowl is its reliance on corporate events, which tend to be sizeable gatherings. Because of social distancing, group business is currently discouraged. Even after the health crisis eases, the nation is expected to be mired in a long, deep recession that will likely prompt many companies to cut back on parties and other nonessential expenses.
Thompson points out that he conceptualized and launched Punch Bowl in the wake of the Great Recession.
“We have opened all the closets and found monsters, and none of those have killed us, so we’re okay,” he says. “We’re going to get there. It’s a big bump along the way, but if you keep the perspective that it is just a bump, you’re going to be over it eventually.”
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