Dive Brief:

• Rave Restaurant Group, owner of Pie Five and Pizza Inn, is at risk of being delisted from Nasdaq. Last week the company received a notice from Nasdaq that it was not in compliance with the listing standard for minimum stockholders' equity of at least $2.5 million based on its fiscal quarter ended March 29, 2020.
• As of July 1, Rave also didn't meet listing standards of a market value of at least $35 million or net income of $0.5 million for the most recently completed fiscal year or two of the three most recently completed fiscal years. 
• The notice has no immediate effect on the restaurant's listing. Rave has until Aug. 22 to submit a plan outlining how it will come back into compliance. If Nasdaq approves the strategy, it can grant the company a max extension of 180 days from the date of the notice to reach compliance with Nasdaq's listing standards.

Dive Insight:

Rave's delisting warning comes just a few weeks after the company reported disappointing Q3 earnings. For the quarter, Pizza Inn's domestic comp sales fell 7.8% and Pie Five's comp sales slipped 21.4%. Total revenue dropped $0.4 million to $2.7 million for the period and Rave reported net losses of $4.5 million for Q3 compared to net losses of $0.3 million during the year-ago period. 

"We have taken extensive measures to protect Rave's financial stability. We looked at all areas to reduce expenses, including furloughing two-thirds of our support staff and an across-the-board 20% pay reduction for all other employees and executive leadership late in the third quarter," Rave CEO Brandon Solano said in a statement. 

Pie Five, the company's fast casual pizza brand, has been particularly struggling. According to Restaurant Business, the company has suffered dwindling sales for 18 quarters straight, shrinking its footprint to 43 units in Q3 2020 from 100 in 2017. On June 29, Solano defended the chain when a shareholder asked if Rave would consider spinning it off during the company's Q3 earnings call. 

"We have absolutely no intention of giving up on Pie Five," Solano said. "We are turnaround folks. We have a long history of turning around brands, and we love a challenge."

Last year, Rave invested in new menu offerings, technologies and operational processes to improve its performance, and increased development resources to grow Pizza Inn, Pie Five and Pie Inn Express, but its financial struggles continued. 

The company has also worked to adapt its Pizza Inn buffet concept to social distancing restrictions. In May, Pizza Inn launched its New Right-Way Buffet, which includes one-way customer traffic, increased sanitation and distribution of silverware and napkins by staff. Some locations also allow for cafeteria-style service by restaurant staff or table service. 

"It’s a big part of our revenue stream. We didn’t feel like we were in a position to punt on adding back self-service," Justin Smith, Pizza Inn’s director of operations, told Grocery Dive in an interview. "For the most part, our customers seem to appreciate we’re open and are excited to get out of their homes."

With the restaurant industry still mired in the economic consequences of the novel coronavirus pandemic, it could be more challenging than ever for Rave to drive growth at its brands, despite strong demand for pizza delivery amid widespread dining room closures.