Checkers & Rally’s Sees Comparable Sales Spike as It Looks to Restructure Debt

The drive-thru restaurant chain has aggressive growth plans for the next three to five years. Such growth, however, will require an injection of capital, which in turn will necessitate a restructuring of the company’s existing debt, Chambers said.

The fast-food company, backed by private equity firm Oak Hill Capital, hired investment bank Miller Buckfire & Co. and restructuring adviser Mackinac Partners to explore its options, according to The Wall Street Journal.

Checkers & Rally’s, which was marked as distressed before the pandemic by the major credit rating agencies, is coming off of a period of growth. In fact, it may have been one of the better positioned restaurant chains, according to Chambers.

That’s because the fast food purveyor has historically relied almost wholly on drive-thru, with little in-restaurant dining to speak of. Because of that, its service approach has been largely unchanged, though it did implement additional sanitation and health safety measures.

“We’re built as drive-thru only,” Chambers said. “We were very blessed to have a drive-thru concept.”

As a result, while business declined during the initial two-month closure of nonessential businesses mandated by state and local governments around the middle of March, Checkers & Rally’s has actually rebounded significantly.

“While we changed our hours, we didn’t have to change a lot. We already had closed off kitchens, and we were able to bounce back pretty quickly,” he explained. “It’s obviously difficult for everyone, and more difficult for some than others.”

Chambers downplayed reports that the fast-food chain is performing poorly, noting that CEO Frances Allen—a former CMO herself of chains such as Denny’s and Dunkin’ who was appointed to the role in February—has since shown operating prowess that has led to record sales.

Checkers & Rally’s had systemwide comparable sales growth of 20% for its most recent period ended in June; Chambers also noted that about three-fourths of its nearly 900 locations are franchised.

He also credited the company’s operators for navigating the challenging environment. “Pundits don’t take that into account,” he said.

During the pandemic, Checkers & Rally’s prioritized its spend from wants to needs, such as investing in foldable trays that would mount to windows and wands that could scan credit cards at drive-thru windows to create a more contactless experience.

It also entered the chicken sandwich wars with the Mother Cruncher, which was launched nationwide in early June and comes in two versions, classic and bacon BBQ.

The new offering, which touts its own secret recipe Squawk Sauce, was developed under the watchful eye of Checkers & Rally’s senior director of research and development, Ryan Joy.

Even before Covid-19, though, Chambers had set Checkers & Rally’s on a more cost-efficient path. “When I got here a year ago, I minimized outside contracts,” he said.

Like most restaurant chains, Checkers & Rally’s looked at ways to be frugal, and did so by deferring a certain percentage of the company’s marketing spend.

When the pandemic hit, in almost all of its markets, the chain went dark on television for about two months, Chambers pointed out.

“We were rated as [having] the most craveable fries in the industry,” he said, and had a big ad campaign tied to that market research ready to air that was ultimately put on hold.

Instead, the fast food chain has focused on supporting its franchisees by waving the required fees that support companywide marketing efforts for that two-month period and, for example, by going into full marketing mode on behalf of locations in New Jersey by providing first responders with free food.

It also emphasized promotions, such as offering a free Buford burger with any purchase in March, while limiting marketing outreach to digital and local restaurants.

As of early June, however, Checkers & Rally’s was back to airing ads and is currently sending its mobile fry kitchen, The Fry Love Express Trailer, to criss-cross the U.S. to give people all over the country the chance to snack on its popular French fries.