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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
Mailing Address:
P. O. Box 33069
San Antonio, Texas 78265-3069 [LUBY'S LOGO]
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 is
included in the company's press release which is included with this letter.
These results are completely unacceptable to the Board of Directors. I am
writing you 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:
- focusing on providing Luby's customers with the made-from-scratch food
and quality dining experience they expect;
- improving Luby's operations to more effectively serve its customers;
- restoring the enthusiasm and sense of ownership of Luby's managers; and
- 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 quarters 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 neglected to tell you that they have no experience managing any restaurant
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.
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 A WHITE PROXY
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 Committee's 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
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Letter to All Shareholders
December 12, 2000
Page 2
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,
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:
- 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.
- 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 headquarters and
field personnel.
- 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 ex-Luby's managers seeking to
return.
- 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.
- RETURNED OUR CUSTOMERS' 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 so that we can market them effectively.
- 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.
- 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 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.
- 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.
