COVID-19 Pandemic

12 Months Ended

Aug. 26, 2020

Unusual or Infrequent Items, or Both [Abstract]

COVID-19 Pandemic

COVID-19 Pandemic

COVID-19 Pandemic

On March 13, 2020, President Donald Trump declared a national emergency in response to the novel coronavirus disease ("COVID-19") pandemic. On March 19, 2020, Governor Greg Abbott of Texas issued a public health disaster for the state of Texas to bring the entire state in line with CDC guidelines including, (1) closing of schools statewide, (2) ban on dine-in eating and gatherings of groups of more than 10 people, and (3) closing of gyms and bars. Governor Abbott followed with an essential services order on March 31, 2020, requiring anyone who is not considered an essential, critical infrastructure worker to stay home except for essential activity, essential businesses, essential government functions and critical care facilities. Most other states, including those states where we operate, issued similar orders. The governor of Texas began relaxing some restrictions on businesses operating in Texas beginning May 1, 2020, which permitted a gradual reopening of businesses, including restaurants, with modified operations.

The spread of COVID-19 has affected the United States economy, our operations and those of third parties on which we rely. Beginning on March 17, 2020, we began suspending on-premise dining at our restaurants and substantially all employees at those locations were placed on furlough. By March 31, 2020 we had suspended on-premise dining at all 118 of our company-owned restaurants and had suspended all operations at 50 of our Luby's Cafeteria's, 36 company-owned Fuddruckers restaurants and our one Cheeseburger in Paradise restaurant. The 28 Luby's Cafeteria's and three Fuddruckers restaurants that remained open were providing take-out, drive-through and curbside pickup, or delivery with reduced operating hours and on-site staff. In addition, more than 50 percent of our general and administrative staff were placed on furlough and salaries were temporarily reduced by 50 percent for the remaining general and administrative staff and other salaried employees, including all senior management. Furthermore, our franchise owners suspended operations or moved to limited food-to-go operations at their locations, reducing the number of franchise locations in operation to 37 by early April 2020 from 90 prior to the COVID-19 pandemic.

Beginning in May 2020, we began to gradually reopen the dining rooms with state-mandated limits on guest capacity at the 28 Luby's locations and three Fuddruckers locations that had been previously operating with food-to-go service only. We also began to reopen restaurants that were temporarily closed. As of June 3, 2020, there were 31 Luby's Cafeteria's and eight Fuddruckers restaurants operating and as of August 26, 2020 there were 60 Luby's Cafeteria's and 24 Fuddruckers restaurants operating, all of which had their dining rooms open at limited capacity. There were 59 franchise locations in operation as of June 3, 2020 and 64 operating as of August 26, 2020 .

We considered the disruptions to our operations and cash flows from the COVID-19 pandemic, beginning in the third quarter of this fiscal year, to be triggering events for purposes of testing our long-lived assets, as well as goodwill, for impairment. See "Note 16. Impairment of Long-Lived Assets, Discontinued Operations and Property Held for Sale."

The full extent and duration of the impact of the COVID-19 pandemic on our operations and financial performance is currently unknown, and depends on future developments that are uncertain and unpredictable, including the duration of the spread of the pandemic, its impact on capital and financial markets on a macro-scale and any new information that may emerge concerning the severity of the virus, its spread to other regions, the actions to contain the virus or treat its impact, and consumer attitudes and behaviors, among others. The COVID-19 pandemic has materially disrupted our operations and cash flows beginning in the third quarter of fiscal 2020 and has resulted in the recording of additional non-cash impairment charges related to our property and equipment and operating lease right-of-use assets related to our restaurants and goodwill.

Given the uncertainty regarding the spread of this virus and the timing of the economic recovery, the COVID-19 pandemic could continue to materially impact our results of operations and cash flows.

Payroll Protection Plan (PPP) Loan and Credit Facility Debt Modification

As more fully discussed at "Note 15. Debt", on April 12, 2020 we entered into a promissory note in the amount of $10.0 million (the "PPP Loan"). In conjunction with the entering into the PPP Loan, we amended our credit facility to permit us to incur indebtedness under the PPP Loan and to terminate the $5.0 million undrawn portion of the delayed draw term loan upon receipt of the PPP Loan. On November 12, 2020, we applied for full forgiveness of our PPP Loan. See Note 2. Subsequent Events.