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UNITED STATES
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Luby's Inc.
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Luby's, Inc.
2211 Northeast Loop 410
San Antonio, Texas 78217-4673
210/654-9000 [LUBY'S LOGO APPEARS HERE]
Mailing Address:
P. O. Box 33069
San Antonio, Texas 78265-3069
December 12, 2000
Dear Fellow Shareholders:
As you are probably aware, Luby's announced very disappointing results for the
first quarter of fiscal 2001. Information about the first quarter's results is
included in the company's press release which is included with this letter.
Obviously, these results are completely unacceptable to management and the Board
of Directors. I am writing to assure you that your management and Board of
Directors are working actively and aggressively to turn this situation around.
While the turnaround will take time, we have begun many initiatives in the last
60 days, all of which are designed to reverse our current trends by:
o focusing on providing Luby's customers with the made-from-scratch food
and quality dining experience they expect;
o improving Luby's operations to more effectively serve its customers;
o restoring the enthusiasm and sense of ownership of Luby's managers;
and
o increasing sales through improved product offerings and marketing.
We have attached a detailed listing of the initiatives for your information.
Although they came too late to affect the first quarter's results, we believe
these actions are already having a positive impact. Our recent Thanksgiving Day
sales were most encouraging - an all time Luby's record. We believe morale among
our managers is improving, and our new products have been well received by our
customers.
Two of Luby's shareholders, calling themselves the Committee of Concerned Luby's
Shareholders, have begun a costly and self-serving proxy contest to place
themselves, together with one other candidate, on your Board of Directors. They
have no experience managing any restaurant or comparable business. The negative
publicity surrounding the proxy contest and the derogatory allegations made by
the insurgents about Luby's food, its employees, and dining experience has
certainly had a negative impact on our sales in recent months and made our
efforts to reverse the negative sales trends more difficult.
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Letter to All Shareholders
December 12, 2000
Page 2
YOUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN ANY BLUE PROXY SENT TO YOU BY THE
COMMITTEE. EVEN IF YOU HAVE PREVIOUSLY SIGNED THE BLUE PROXY SENT TO YOU BY THE
COMMITTEE, YOU CAN REVOKE IT BY SIGNING, DATING, AND MAILING THE LUBY'S WHITE
PROXY CARD SUPPORTING YOUR BOARD. IF YOU NEED A WHITE PROXY CARD OR ASSISTANCE
IN VOTING, PLEASE CALL 1-800-322-2885.
Despite the distraction of the insurgents' costly and self-serving proxy
solicitation, let me assure you that our focus continues to be on our employees,
the quality of our food, and the dining experience of our customers; we believe
that focus will create the greatest return, in the long run, for our
shareholders.
All of us in the Luby's family, the Board, management and employees, are pulling
together to restore Luby's to its respected position in the restaurant industry
and return the value of our stock that has been lost. Luby's greatest strength
resides in its many loyal and committed employees and customers. With their
continuing support and the patience and support of our shareholders, we can turn
our current situation around and return Luby's to profitability.
Thank you for your continued support and interest.
On behalf of your Board of Directors,
/s/ DAVID B. DAVISS
David B. Daviss
Chairman of the Board and
Acting Chief Executive Officer
On December 11, 2000, Luby's filed with the SEC definitive proxy
materials which will be used to solicit votes for the election of directors at
its Annual Meeting of Shareholders on January 12, 2001. The proxy statement
contains the names of and certain information about the participants in any
solicitation that may be represented by this letter and the definitive proxy
materials. Copies of the proxy materials are available for no charge from Luby's
proxy solicitor, MacKenzie Partners, Inc., at (800) 322-2885 and from the SEC's
web site at www.sec.gov.
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OPERATING INITIATIVES
In the last 60 days Luby's has:
o BEGUN A SEARCH FOR A NEW CEO. Our search is intended to identify qualified
candidates, both from inside and outside the Company. We have identified
criteria we believe are necessary for Luby's new leader. We have used our
contacts throughout the industry to identify qualified candidates. We have
also hired an executive search firm to help us expand this list of
candidates and to evaluate all candidates according to the criteria
identified.
o UNIFIED ALL COMPANY FIELD OPERATIONS AND SUPPORT FUNCTIONS UNDER THE
DIRECTION OF A SINGLE SENIOR VICE PRESIDENT, DARRELL WOOD. Darrell's
experience as a manager and as an Area Vice President has already helped to
more quickly identify problem areas in operations, to speed development and
implementation of solutions to these problems, and to greatly increase open
and honest communication between Luby's corporate office and field
personnel.
o IMPLEMENTED A NEW MANAGER COMPENSATION PLAN. This new plan, implemented on
November 1, 2000, provides greater incentives to managers from
participation in store profits with bonuses for improved performance. This
program is restoring the enthusiasm and sense of ownership of our employees
as they directly participate in the improvement of their restaurant. We
have even had calls from several former Luby's managers since November 1
seeking to return.
o REEMPHASIZED THE IMPORTANCE OF PROVIDING THE QUALITY "MADE-FROM-SCRATCH"
FOODS THAT OUR CUSTOMERS Expect. Last year the Company decided to use a
limited amount of outsourced (or value-added) food as part of a plan to
reduce the in-store labor and kitchen size. In May 2000 the use of these
outsourced products reached its maximum at 9.3% of the Company's purchases,
which is a much smaller percentage than many of the Company's detractors
would have you believe. However, it did have a negative impact on the
perception of our customers and the flexibility of our managers. As a
result, we have been reducing the use of outsourced products. Outsourced
products now represent less than 6% of the Company's purchases, and we
expect this percentage to decrease further as a result of the increased
authority of managers to select the food products for use in their
restaurants.
o RETURNED OUR CUSTOMER'S FAVORITE DISHES TO OUR MENUS. We have identified
and enhanced menu items that have historically been popular with our
customers. These dishes are being made available in all of our restaurants,
and will be marketed aggressively.
o BEGUN DEVELOPING NEW PRODUCTS AND PRODUCT LINES. We believe our customers
will find these new products and product lines appealing. These dishes are
being thoroughly tested both from a consumer acceptance and an operational
feasibility standpoint before they are introduced. We believe they will
provide a vehicle for new marketing and promotional activity to build
sales.
o REFOCUSED ON TRAINING TO PRODUCE HIGH QUALITY FOOD. We have centralized our
training program in San Antonio for new managers under the guidance of a
long-tenured Luby's field operations executive. Continuing education for
existing managers is being conducted in the field on a regular basis. All
training is focusing primarily on food quality.
o BEGUN AN INTEGRATED MARKETING PROGRAM. This integrated marketing campaign
featuring television and radio advertising in major market areas supported
with print media and limited coupons, is designed to encourage new trial
and increased frequency. This campaign began after Thanksgiving and will
continue through January.
