Dave and Buster’s, the restaurant/bar/emporium with Little Rock roots that grew into a large corporation, gets a mention in today’s New York Times for being among the big restaurant chains seeking government relief payments.
The companies needed billions of dollars in aid to avoid mass layoffs, the executives said. The next day, their trade group asked government leaders, including Mr. Trump, for $145 billion in relief.
These companies had been highly profitable in recent years, yet they were seeking help from the federal government. Where had all their money gone? Like much of corporate America, the restaurant chains had spent a large chunk on buying back their own stock, a practice aimed at bolstering its price. Some were even more vulnerable to the economic shock because they had previously increased their borrowing — including to fund buybacks or pay dividends — and strained their credit in the process.
So companies’ stockholders got fat for a time. But they weren’t prepared for this crisis and now want taxpayer help. Dave and Buster’s is not alone, but it got separate attention in the article.
The situation is dire for some restaurant companies that pushed the financial envelope.
Dave & Buster’s, a chain of game-filled restaurants, warned this month that with all its locations closed, there was “substantial doubt” that it could remain a going concern. The company spent $627 million on stock buybacks and dividends in its last three fiscal years, nearly twice its net income for the period.
At the start of February, Dave & Buster’s had 15,908 employees. Because of the pandemic, all but 165 are on furloughs. In the annual report from a year ago, the company flagged the risk of illnesses, though it was not identified as a prominent risk factor.
Last week, Dave & Buster’s issued new stock to help it absorb the shock of the pandemic but did not disclose how much it had raised. The company declined to comment.
I can’t think of Dave and Buster’s without thinking of former Arkansas Sen. Jeremy Hutchinson, the governor’s nephew.
Hutchinson, who represented a variety of gambling interests over the years, pushed through the legislation that provided a gambling law exemption that allowed Dave and Buster’s to give bigger prizes (worth up to $500) to people playing its coin-operated machines. The law change was needed to lure the chain to Arkansas, he said. Its first outlet was in Little Rock and a second was opened in Rogers.
Hutchinson’s tenure was cut short by federal crime-stoppers before he could land a bigger gambling prize, legislation help would-be operators of coin-operated games at convenience stores and other outlets all over Arkansas.