Bob Evans Farms, Inc. Report

Group 5 Project Report

Bob Evans Farms, Inc.

By Bianze Li, Zhen Liu, Marc Plutno, Kristen Shank and Shouming Zhang

October 16, 2016

I.               History and Overview

                Bob Evans Farms, Inc. owns and operates full-variety family restaurants. This company also produces and distributes pork sausages and a variety of complementary homestyle convenience food items. The chain has been around for generations and specializes in a “laid-back” and warm and friendly atmosphere based off the farm and country theme is known for. Bob Evans Farms also currently competes with other similar restaurant chains such as Buffalo Wild Wings, Texas Roadhouse, the Cheesecake Factory and BJ’s Restaurants.

                The story of how Bob Evans Farms, Inc. was established first began in the Ohio countryside in 1948 when the founder, Bob Evans began selling high-quality sausages to various customers at a local diner and also through shrewd supply chain managing skills (by partnering with truck drivers to deliver the sausages to other locations) in the area. Soon, he began to develop a reputation for selling high-quality food and demand increased dramatically. As a response, Bob began to work with family and friends who recognized how much potential his sausage business had, and in 1953, Bob Evans Farms was formally established as a company. Later on, Bob Evans built a restaurant called the “Sausage Shop” as a result of the high demand for the high-quality sausages, and eventually Bob Evans Farms, Inc. was able to increase its profits substantially and become a well-known chain, with locations primarily in the Midwest, Mid-Atlantic, and Southeast regions of the United States.

                The current status of Bob Evans Farms, Inc. reflects that of the overall restaurant industry, where the amount of profits a restaurant chain makes is directly affected by how many customers it can attract, as well as the amount of money a restaurant spends on labor. Over the last 6-8 years, same-store sales have fallen to the point where activist Thomas Sandell has successfully agitated for a sale-leaseback program and is now calling for the chain to engage in a divestiture of the food business, even as its packaged food division has increased organic sales by more than 5% since fiscal 2013. Since all restaurants are corporate-owned and generate $1.7 million in annual sales with a $9.61 guest check average, management has recently closed 41 underperforming stores in fiscal 2016 to boost margins and cash flow. As a response to declining sales, the chain has vowed to debut a new menu in 2Q 2016 in order to improve food quality and hospitality as a way to boost 2017 sales.