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FURR'S/BISHOP'S, INCORPORATED
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FURR'S/BISHOP'S, INCORPORATED
6901 QUAKER AVE
LUBBOCK, TEXAS 79413-5943
806/792-7151
Theodore J. Papit
President and Chief Executive Officer
May 5, 1998
Dear Furr's/Bishop's, Incorporated Shareholder:
Upon my appointment as President and Chief Executive Officer of your Company on
March 28,1997, I assumed management responsibilities for a restaurant operation
with a long, successful history but a more recent, troubled past. With
problems dating back to the late 1980's, my first priority was to begin
rebuilding the brand by improving its operating standards, advertising
effectiveness and comparable store sales - in addition to identifying and
closing under-performing units and maximizing profitability. Our ultimate goal
through these efforts has been to increase shareholder value.
We began these initiatives in mid-1997. With sales and profit improvements by
year-end, the next step was to focus on developing a competitive market
position.
To achieve this objective, we concentrated on:
1. Creating a more assertive advertising plan to effectively communicate
the Company's value position - quality all-you-can-eat meals for under $6.
2. Initiating a remodeling program to demonstrate a relevant, progressive
and committed brand to customers and employees.
3. Continuing to improve operating efficiencies by focusing on cost
management and consistent execution.
In addition, we identified core markets likely to generate the greatest return
on investment.
CORE MARKET STRATEGY
The business strategy concentrates on core market operations that share
distinct and successful characteristics:
- Established brand equity.
- Media-efficient markets.
- Strong family dining category.
- Demographics skewed to moderate income, family households.
The core market list provides a steering mechanism for reimaging and growth
decisions, selection of broadcast advertising, improving profit and maximizing
shareholder value.
<PAGE>
IMPROVING AWARENESS THROUGH ADVERTISING
Our advertising/marketing plan focuses on the Company's core markets and was
designed to work on two levels.
1. The essentials of the all-you-can-eat position - price, value, variety
- had to be clearly communicated to the family target through a television
advertising campaign designed to deliver the brand's attributes.
2. With better positioning, the need for increased awareness was
essential. Therefore, the objective was to put Furr's/Bishop's on the
customer's "short list" when considering dining destinations by expanding
the scope of our television advertising support.
The results of the media plan demonstrate that higher awareness levels, coupled
with improved menu offerings and better execution, lead to greater profit.
This strategy continues to be successful. First quarter comparable sales for
1998 media markets are up for the second consecutive year.
REMODELING
Many of the existing restaurant facilities were in outdated condition and in
need of a more progressive look. To consumers this communicated one clear
message - Furr's/Bishop's restaurants were "out of touch" - positioned better
for the 1970's than the new millennium.
In late 1997 we initiated a remodeling program to rebuild the brand's image -
to communicate freshness, vitality and relevance in a fiercely competitive
marketplace.
To successfully achieve this objective, dramatic changes were necessary.
Interior walls were removed to provide an open serving and dining environment.
Product displays were implemented, brighter, fresher colors and furnishings
replaced old decor and fixtures and a "to-go" venue was added to increase our
share in the expanding home-meal replacement sector.
To better understand the strength of this program, remodeling efforts were
first initiated in two of our most competitive core markets. The early results
are very encouraging. First quarter comparable sales in 1998 are up 10.5% over
1997 in these units and guest counts are exceeding previous-year levels.
IMPROVING OPERATING EFFICIENCIES
Operating leadership and local store management have been successful in the
last several quarters delivering a better bottom line while meeting guest
expectations. This has been achieved by addressing two critical areas.
1. Store-level execution is improving with the development of better
menus. With the assistance of Dynamic Foods (our in-house purchasing and
distribution division), our restaurants are offering new items developed to
meet the expectations of customers. The menus are also designed to
simplify execution (a must in today's labor pool), enhance quality and
control cost.
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2. Successful cost management is being recognized through improved labor
scheduling, tighter production controls and the replacement of older
kitchen equipment with new, more efficient equipment.
By taking a customer/employee focus, the Company is enhancing the value
delivered to consumers today.
BUILDING A BETTER BOTTOM LINE
With initiation of the advertising, remodel and operating programs, comparable
store sales have continued to improve.
1997 vs. 1996 Comparable Store Sales
------------------------------------
Third Quarter + 1.8%
Fourth Quarter + 0.6%
In first quarter 1998, comparable sales volume was the highest since 1993.
1998 vs. 1997 Comparable Store Sales
------------------------------------
First Quarter + 2.6%
First Quarter 6 Remodel Units +10.5%
Increased sales are resulting in greater profitability. Since mid-1997,
operating profit has improved significantly.
1997 vs. 1996 Income Before Special Charges and Credits
-------------------------------------------------------
(dollars in thousands)
1997 1996
------ ------
Third Quarter $1,393 $1,659
Fourth Quarter $1,600 $ 843
1998 vs. 1997 Income Before Special Charges and Credits
-------------------------------------------------------
(dollars in thousands)
1998 1997
------ ------
First Quarter $2,024 $ 760
THE ROAD AHEAD
The Company must continue to expand on the previously mentioned programs in
order to improve its operating profit. We need success to further explore the
opportunities which exist today.
<PAGE>
The Company is only beginning to show the potential of its vitality. Through
the continuation of our initiatives we will be better able to:
- Re-energize more units and markets through the remodeling program.
- Attract and retain quality management.
- Add new units in core markets, thereby improving advertising
effectiveness.
- Deal from a position of strength. By utilizing a growing business, we
can successfully work with outside financial expertise to achieve better
liquidity and value for our shareholders.
BOARD NOMINEES
In its Proxy Statement for the Annual Meeting of Shareholders, Furr's/Bishop's,
Incorporated announced a slate of nine candidates for election to the Board of
Directors.
The nominees were selected for their expertise in the areas of:
- Capital acquisition
- Marketing and advertising
- Board experience
- Restaurant industry experience
- Strategic positioning
- Executive management experience
To continue the success of the recent operating quarters, a majority of the
current Board feels it is in the best interest of the Company and its
shareholders to elect this slate. Approval will provide the experience and
harmony required to work successfully with management, improve the flexibility
to explore new opportunities, rebuild the Company and maximize shareholder
value.
To support the continuation of our success, I respectfully ask you to vote FOR
the Company's Board of Directors slate.
Whether or not you plan to attend the Annual Meeting, please sign, date and
return your white proxy card as soon as possible.
Sincerely,
Theodore J. Papit
President and CEO
Furr's/Bishop's, Incorporated
