All posts by Roger Lipton



Our initial discussion of ARKR (at $19) was in April ’20 and our update in September ‘21 (at $16) described the underlying value within this Company. Both reports can be accessed by the use of the SEARCH function on our home page.


The appeal of ARKR lies in the demonstrated cash flow, the long-term value in the underlying real estate, the dramatically increasing participation in the rapidly growing southeaster US (Florida and Alabama) and the substantial long term “kicker” from their involvement in the NJ Meadowlands gambling venue. Though every aspect of the shareholder value equation has improved over the last nine months, we attribute the continued undervaluation to the normally very light trading of the common stock, and the secure control (with 36% ownership) of management. ARKR (at $17) is trading at only 7.6x trailing 12 mos. EBITDA (including a pretax loss in the normally profitable first six months), which should look even better as recovery from the worst of the pandemic continues.

The current liquidation of Luby’s (LUB) at a value many times what it traded for less than a year ago is unrelated to ARKR but reminds us that underlying value does not get ignored forever.

We believe that the assets within Ark could be monetized for a total value somewhere between two and three times the current stock price. Our expectation (with no guidance from management) is that the dividend, which could easily begin at the old $1.00 annual rate will be reestablished within the next twelve months (subject to the Covid), providing a handsome current yield that could go higher over time. While management is clearly content building long term value in the current fashion, CEO and controlling shareholder, Michael Weinstein, is in his seventies and his inclination to monetize assets and provide liquidity for ARKR shareholders could obviously change for any number of reasons.


The following table provides the annual revenue breakdown by geography. It is clear how Florida has become much more meaningful, how NY and Washinton, DC, have continued to negatively impact results in 2021 (reasonably expected to improve), and also how material Las Vegas is, considering that those leases are in the process of being renegotiated. We note that Ark has lost $5M in revenue due to restaurant closures since 2020, namely: Gallagher’s Steakhouse & Gallagher’s Burger Bar which did $2.2M in 2020 before closing last year; Thunder Grill in Washington DC, which generated $1.03M in 2020; and Clyde’s in New York City which did $2.04M in 2020 before closing down in 2021.

On the call, management called out a couple of examples of higher seafood costs. For example, six months ago the company was paying $23 a pound for King crabs (1 out of 4 people order King crabs at the Rustic Inn. A typical serving is 2 pounds of crab and originally retailed for above $75 for a 39% margin. At its peak the prices rose to approximately $53 a pound and the company raised the price to $125, which resulted in only a 7% margin. Product costs as a percentage of sales at the Rustic increased from 43% to 57%. The company was carrying $2.3M in inventory at the end of the quarter, which is nearly $1M or 50% higher than last year. A second example was the price of conch products, which are used at Shuckers. The price went from $300 a case to $1250 a case. The current price is around $750 a case. If commodity costs can revert to more normal levels, there is the potential for a $1M-$3M increase in operating margins.

One cost center that was favorable for the company was labor. Due to staffing shortages, the company was able to keep labor costs 200-250bps below historical levels. A 10-15% reduction in employees helped to offset the higher hourly labor costs.


Regarding Las Vegas:

CEO Weinstein said that the company is waiting on the new leasing contracts for their New York New York restaurants in Las Vegas (which has averaged about 30% of total revenues), obviously an important consideration. While 2021 revenue was $38M, which was down $11M from 2019, revenue in Q4 was $13M, 13% above 2019. Considering the lack of convention business and the Covid-19 restrictions in Vegas earlier in the year, a strong Q4 hints at a strong 2022. Payroll costs were flat YOY. Higher wages were offset by staffing issues that resulted in an 8% shortfall in employees (50 people short out of 600 staffing requirements. Company expects to spend $5-$7M on leasehold improvements. While rent will undoubtedly be higher, the Company believes that pricing opportunity can recoup a large portion of the higher rent.

Regarding The Meadowlands:

Meadowland continues to dominate the sports betting market in New Jersey. 40% of online betting websites and 50% of on-premise betting is captured by the Meadowlands. The handle is around $500M, with a 6% hold (higher than the 5% expected long-term average). CEO Weinstein disclosed that the partnership had $15M in EBITDA, meaning that the partnership is cash flow positive and will not require any additional investments by ARKR. The company expects to receive a cash distribution to offset the reportable taxes from the partnership. On January 8th New York legalized online sports betting on January 8th and industry experts have estimated as much as 25% to 30% of sports bets in New Jersey are placed by New York residents. We expect to see an initial decline in betting at the Meadowlands, but New Jersey will most likely remain the second largest sports betting market in the county.

The next benchmark will be the issuance of three full gaming licenses for downstate casinos in New York City. Lawmakers are already pushing to start the process to award the three licenses by the end of the year. Key politicians to watch are Gary Pretlow, chairman of the state Assembly Committee on Gaming and Wagering and Joe Addabbo, the chair of the Senate gambling committee. According to CEO, Weinstein: “If that is advanced forward, we may get some action by the New Jersey legislature to progress forward the consideration of casino license in the northern part of the state, particularly the Meadowlands. Honestly, what I think happens, if there is a casino license issued, I think it takes about 5 minutes for Hard Rock to come to us and say, how much do you want for your position? “


Ark exited 2021 with over $23.3M in cash (and current receivables) on the balance sheet and $3.9M receivable in tax refunds, ARKR is close to “net debt free” against the $32.5M of Total Debt (excluding lease liabilities) ($25.5M LT and $7.0M ST). The Total includes $3.5M incurred with the purchase of Rustic, $4.0-Shucker’s, $3.5-Oyster House, $4.8-JB’s, $2.2 Sequoia, $0.8-Blue Moon, $4.7-PPP of which $3.1 is expected to be forgiven), and a bank revolver of $9.2. Ark can obviously service the short term obligations from cash flow generation and has $28M of cash equivalents to invest in attractive opportunities.

There is no reason to “reach” for a deal. While potentially attractive new opportunities are always under investigation, a number of current properties provide expansion potential at negligible risk. In addition to the $5-$7M of improvements the company will make in Las Vegas, CEO Weinstein discussed several other projects. The Company is hoping to move the event space at their Robert restaurant located at the Museum of Arts and Design in New York City from the 7th floor to the 10th floor, at a cost of $2-3M, which would more than double that square footage and connect to the restaurant on the 9th floor. At JB’s on the Beach in Deerfield Beach, Florida (which is generating about $12M of revenues annually), ARK plans to build a deck over the top of the restaurant at a cost of $2-3M. At Blue Moon Fish Company, Lauderdale-By-The-Sea, FL, Ark is hoping to expand the deck which overlooks the intracoastal waterway to add 60-70 seats (more than doubling the current 50 seat capacity) at a cost of $2-3M. These projects combined will require close to $15M over the course of two to three years and should generate a very high return on invested capital. At the same time, the Company could easily raise debt capital, at an affordable rate, to finance opportunistic acquisitions such as Ark has implemented in recent years.

LAND – “they ain’t making any more of it”

Ownership of the land under a business, especially in an obviously attractive location, provides a material degree of financial strength to the operator. It’s been proven time and again that the land can turn out to be worth more than the business. In the near term for the operator, however, the advantages of land ownership are (1) No rent to be paid, so free cash flow is that much larger (2) A lower cash breakeven point, allowing for survival in difficult economic times (3) Easy borrowing capability if and when it becomes necessary (4) Based on number (3) a higher sale value for the business because the land can be so easily monetized. Of course, the reason that banks are so much more willing to lend to a business that owns, rather than leases, their operating property is because the land in essence “protects the downside”. If the business goes bad, the land value can be the savior.

Back to Ark Restaurants, and their LAND:

Over the last seven years Ark has purchased four restaurants including the underlying properties: Two Oyster Houses in Alabama (2017), Shucker’s (2016) and Rustic Inn (2014) in Florida. ARKR paid about $26M, five times the $5.2M TTM store level EBITDA at the time. In the last twelve months those properties generated about $8.5M in EBITDA (Out of about $20M of co-wide store level EBITDA), reducing the purchase price to close to only 3x the latest EBITDA. Most importantly here and now is that $8.5M has been generated without lease expense. Depending on the cap rate, ARK could raise on those four properties $30M, for example, which after rent could still leave well over $5M in store level EBITDA. That $30M could obviously be redeployed in the purchase of other properties, hopefully to be bought for 5-6x EBITDA, with margin improvement under Ark’s management a predictable objective. A great deal more than $30M could obviously be raised, for any combination of purposes. This simple exercise demonstrates how ARKR’s Enterprise Value of about $64M so substantially undervalues the Company.

CONCLUSION: Provided at the beginning of this Update

FOLLOW THE MONEY with ROGER LIPTON – article published in prestigious RESTAURANT FINANCE MONITOR – 1/15/122

RESTAURANT FINANCE MONITOR – 1/15/22 ISSUE – Follow the Money with Roger Lipton – Roger’s monthly column

Inflation is in fact the real concern, but not necessarily the kind the journalists are talking about. The headlines are all about supply channel distortions that lead to a rise in commodity prices and the increase in minimum wage that drives labor costs up. Those are ripples in the inflationary sea compared to the tidal wave that is lurking offshore. It just so happens that the dangers we are about to describe hang over us just as the economy is already cooling. Open Table data shows indoor dining during Christmas week was down 33% from 2019 and Jeffries’ economist just cut their Q1 Real GDP Growth estimate from 6.6% to 1.5%.  Here’s the problem. A large part of the “recovery” in the economy has been generated by consumers taking their savings rate back to 6-7% from over 30% at the beginning of the pandemic and the wealth effect due to home values and stock market indexes near record highs. Even with household wealth (on paper) at record levels, consumers’ sentiment is the lowest in at least 13 years, the lowest in 40 years by some measures. The “wealth”, however, is largely a mirage. Over half the return in the S&P 500 since April has come from five stocks, the concentration higher than 1969 or 1999, before those bubbles deflated. A number of prominent bubbles have already deflated, including the SPAC universe, and Bitcoin is down 33%. Stock in the Robinhood trading platform is down 50%, amplified by the declines of over 50% from the highs in Game Stop and AMC. All of this is to say that tens of trillions of dollars printed by central banks around the world has had a predictable effect. Until recently it did not impact food prices but asset inflation drove the wealth effect that has kept the music playing for over ten years. We doubt that our Federal Reserve leading worldwide central banks, and the conspiring political class, will have the political will to take the punch bowl very far away. The attempt to do so, however, could be very unpleasant.

Restaurant stocks, on the other hand, have corrected materially from their much higher valuations in the Spring of 2021. Especially since many well-run chains have discovered new profit centers by way of servicing off-premise diners, and could even produce record high profit margins once the pandemic dust finally settles, the fundamentals at the current valuations justify a fresh look. For example, five well established restaurant chains, starting at the top of the alphabet, BJRI, BLMN, CAKE, CBRL and CHUY, on January 5th are down an average of 28% from their highs last May. While it is true that QSR chains are actually up 10-15% over the last two years, that is distorted by the extraordinary performance of Domino’s, Papa John’s, Wingstop and Chipotle, all major beneficiaries of the pandemic. Absent those, the rest of QSR is down as well.  The five IPOs of ’21, DNUT, SG, FWRG, PTLO and BROS are down a similar 29% from their post IPO highs. The two rapidly growing service companies, TOST and OLO, are both down over 50% from highs, more extreme declines no doubt due to the fact that, promising as they are, neither is yet profitable. At this point investment in “best of breed” companies is one way to go, with names like Darden, Cheesecake and Texas Roadhouse in full service, McDonald’s and Starbucks in QSR. Priced much lower, at 6-7x near term EBITDA are mature chains such as Bloomin’ Brands, Brinker and Ark Restaurants in full service. Well established franchising companies, here to stay (and grow), in spite of recent disruptions, are companies such as Ruth’s Chris, Jack in the Box and Restaurant Brands, now trading at near term EBITDA multiples in the low teens. All these valuations are 25-40% lower than just seven to eight months ago.

Over one hundred percent has been made in less than a year in a restaurant stock that has been publicly held for almost forty years, namely Luby’s (LUB). Some of us remember when Luby’s “wrote the book” in the cafeteria business, with highly paid store managers leading a great operating culture. As late as 1999 LUB was paying $.80 per share in dividends. After a $49M loss in ’01, including a $30M write-down, the Pappas brothers, highly regarded Houston based restauranteurs, bought effective control (9% of the Company for $10M). Importantly, at that time the Company owned the land and building under 125 of their 219 restaurants. LUB has lost money in 12 of the twenty years of Pappas ownership. In the course of it, Fudruckker’s was bought in 2010 for $63M in cash, with 59 company operated stores (22 with land and building) and 129 franchised restaurants. In 2012 LUB bought Cheeseburger in Paradise for $10.3M in cash, with 23 full-service restaurants in 14 states. At the end of 2020 the Company consisted of 61 Luby’s (42 with land & building), 24 company operated Fudruckker’s (9 with land and building), 71 Fudruckker’s franchised locations, zero Cheeseburger’s. In late 2018, with the stock at $1.50, an activist investor initiated a proxy contest against 36% Pappas owners, which precipitated a Board decision in May ’19 to “consider strategic alternatives”, resulting in a September ‘20 decision to liquidate LUB with an estimated $3.50 per share value. So far $2.00 per share has been paid out, with an estimated additional $3.00 per share to come. This result illustrated, as this column suggested back in September, that the dirt can be worth more than the operations. It also didn’t hurt that both the Pappas brothers were over 70, likely an incentive to monetize their long-term holding in Luby’s.

Roger Lipton



Cooper’s Hawk Winery and Restaurant was riding high four years ago, as we described in our article at time, provided below. Turns out to be a great “case study”.

Management made one of the great sales of all time in mid 2019, at a reported 25x trailing EBITDA and 3x trailing sales. The buyer, Ares Management, must have wondered, as the world shut down in 2020, if there would ever be a chance to get out “whole”. Turns out, we guess,  that landlords didn’t have a better idea for these big box restaurant sites and provided management time to rebuild and perhaps even improve the business over the last two stressful years.

When you hear the current management presentation, you can compare it against the situation as we described it four years ago.




Cooper’s Hawk Winery and Restaurant – providing a differentiated “experiential” dining occasion.

Cooper’s Hawk was founded by Tim McEnery in 2005 and has grown to 30 high volume locations at the end of 2017. McEnery experienced his first foodservice employment as a dishwasher at the age of eleven, later worked after college at Aramark and Lynfred Winery. About thirteen years ago, twenty-nine-year-old McEnery visited a Chicago area winery and envisioned a restaurant/winery combination. After raising $1.3M from family and friends, and borrowing $1.0 from the SBA, the first Cooper’s Hawk opened in Orland Park, Illinois. It was 13,000 feet in total, accommodating a winery, restaurant, tasting room and gift shop. McEnery’s vision was a “Lifestyle Brand”, an “Experiential” dining occasion, creation of a “Culture of Community” where wine aficionados can interact with those of similar interest. The unique “culture” of the organization would center around good food (at modest prices) complimented by high quality wines (also at affordable prices) in a comfortable social setting. That original restaurant generated $5 million in its first year, and is today the highest grossing restaurant at over $12M.

At first, McEnery “did it all”, but after two years, moved the winery into its own space, at first adjacent to corporate headquarters, now located in Countryside, IL and also hired a professional winemaker, Rob Warren, to take over that responsibility. The 125,000-square-foot CH winery is now the 31st largest in the US, the fifth largest outside the state of California, producing annually about 300,000 cases and 50 varieties. Many of the wines are made from California grapes, as well as from Michigan, NY, OR, WA, as well as internationally (Italy, Australia, Chile). “Finished wines”, fermented but not blended, fruit and fruit extracts are also purchased to produce the eight popular fruit wines (including raspberry, peach and rhubarb), all sold for $15 or less. Wine by the glass is also modestly priced, many in the range of $7-$9. Bottle prices are mostly under $30. The tasting room is adorned with glassware, trinkets, and a variety of chocolate products, which guests like to pair with wine choices.

There is an active and rapidly growing Wine club/Loyalty program, with 290,000 members at 12/31/17, and that number has compounded by 60% over twelve years. The customer base is “upscale”, since 65% of the members are women, 44% have household incomes over $100,000, 87% are married, 53% have no children, 31% have Bachelor’s Degree, 19% Graduate Degrees. The Wine Club members receive a special offering every month, usually in the $15-20 price range. 99% pick up their bottle at the restaurant, and 65% make additional purchases. Since the Loyalty program provides what amounts to a 7% discount, and “Two-Bottle” Members who utilize their full suite of benefits, receive almost $1,000 of value in twelve months, the already modest food and wine prices are made even more attractive. Regularly scheduled wine tasting events and trips are scheduled to bring the customer community together. Lastly, regarding the wine program, there have been active affiliations with “celebrity” winemakers and chef’s, such as, Tyler Florence, Jean Charles Boisset, Fabio Viviani, Gail Simmons, and others, adding further credibility to the program.

Then there is the food. Entrees are modestly priced, starting at $17.99 for Parmesan-crusted chicken, most entrees priced under $30.00. Appetizers range from $9-13, sandwiches and hearty salads from $11. The menu is adequately broad, including meat, fish and pasta. More specifically, entrees include soy ginger salmon, chicken Giardiniera, Asian pork belly tostadas and Mexican drunken shrimp. Each dish is made from scratch, and, PREDICTABLY, there are suggested wine pairings. There is a gluten free menu, and a Life Balance menu with each dish under 600 calories. Desserts include chocolate-covered strawberries, truffles and cheesecake lollipops and sell for about $8.00. Lunch includes sandwiches and salads.

As of 12/31/17, there were 30 locations, (up from 25, 20 and 18 in ’16.’15 and ’14) Eight units are in FLA, ten in IL, two in IND, one in MD, 2 in MO, 3 in OH, 3 in VA, and 1 in WI. Five are planned for ’18, in Pembroke Pines, FLA, Clinton Township, MI, New Lenox, IL, Orange, OH, and Virginia Beach, VA.

The average volume in ’17 was $8.3M, and $9.4M for stores open at least three years. Same store sales have been up every quarter over the last three years, an impressive 8% in both calendar ’16 and ’17. Relative to in-store dining, 56.1% represented food sales. In terms of unit level economics leading to calculation of cash on cash returns, the model here differs from most restaurant chains by virtue of cost allocations between the winery and dining locations. Based on the high average volume/unit, we estimate that “Operating EBITDA”, before general corporate G&A, is in excess of 20%, generating an attractive corporate return on equity. Parenthetically, the private equity sponsor, and minority owner of Cooper’s Hawk, is the prestigious KarpReilly investment firm.

Cooper’s Hawk Winery and Restaurant is clearly an increasingly prominent, and highly successful participant in the full-service dining and drinking category. Their approach is unique, defensible (i.e. not easily replicated) and obviously attractive to customers, especially considering the impressive same store sales gains in recent years. Numerous fine dining awards, focused on the wine, the food, and the overall dining experience have been bestowed upon Cooper’s Hawk. The original McEnery vision and “culture” seems to pervade this company’s operation, an especially necessary ingredient to “rise above”, in today’s competitive and challenging environment.

Roger Lipton



Brett Levy Upgrades Texas Roadhouse to Buy, Brian Bittner Uprades Chipotle to Outperform. Christopher Carril joins Bittner in downgrading  Starbucks.  Sara Senatore Initiated Krispy Kreme with a Buy. Brian Vaccaro Initiated  First Watch with an Outperform.

None of the companies above had earnings reports lately but we have provided below a link for First Watch’s update this week and Krispy Kreme’s slide presentation

FIrst Watch

Krispy Kreme


A quiet time. No reports scheduled until the last week of January. We will keep you posted.



FAT Brands has been aggressively adding to its multi-branded franchising portfolio throughout the two-year course of the Covid pandemic. We have previously chronicled (accessible by way of the SEARCH function on our Home Page) the details of that process and we present below a number of slides in the Investor Presentation released yesterday that provide an update. Most importantly, the Company has strategically pivoted, concentrating over the next year or so on consolidating and building upon the recent acquisitions from an operational standpoint, reaping the substantial organic growth and synergistic rewards, which will simultaneously allow for re-rating of the existing debt and allow for $20-30M per year less debt service. Management has stated that “tuck in” opportunistic acquisitions may still be made, such as the recent purchase of Native Grill Wings but the primary focus will be as stated above.

The slides below (1) summarize the acquisition timeline of the last two years (2) provide a summary of FAT’s portfolio as it stands today (3) updates operating results through Q3’21 (4) and provides a summary of the most important cash flow “levers” that management expects to demonstrate over the near term.

The slide just below shows the sequence of acquisitions, starting with Johnny Rockets in the fall of ’20. It is important to note that the most recently reported quarter, Q3’21, did not yet reflect a full quarter of Global Franchise (with Round Table Pizza, acquired 7/22/21), nor any contribution from Twin Peaks (acquired 10/1/21), Fazoli’s (12/16/21) or Native Wings (12/17/21). The third quarter therefore did not reflect about 35% of the $2.23B of (2019 based) systemwide sales among the current 17 brands.






The ONE Group (STKS – 12.99, UP $0.34 –  strong fourth quarter, Manny is doing the job!)

DENNY’S CORPORATION (DENN – 16.26, down $0.12 – making steady progress under John Milller, Omicron not helping at the moment)

SHAKE  SHACK Inc. (SHAK – 76.97, up 8.64 – continues recovery from Covid, Q4 comps up 2.2% in Q4, sharply improved from down 7.3% in Q3, Street relieved)




Publicly held restaurant, franchising and retailing companies appear today, again tomorrow and Wednesday morning at ICR’s “must attend” conference, usually in Orlando but held virtually again this year.

Announcements have often preceded the public appearances and the news has sometimes been unsettling, stock prices  reacted accordingly. We provide below links to the news releases that have triggered the largest price changes.

BURGERFI (BFI – consolidating after acquiring Anthony’s Coal Fired Pizza – up 0.35%)

DUTCH BROS INC. (BROS – got hit early, closed up 2.88%)

CARROL’S RESTAURANT GROUP ((TAST – already at a multi-year low – up 0.34%)

NOODLES (NDLS – announces major multi-unit franchise agreement – up 6.33%)

FIRST WATCH RESTAURANTS, Inc. (FWRG – finding its footing after IPO – up 2.33%)

RCI Hospitality (RICK – presentation fine, just profit taking after recent run – down  3.58%)