Business

Warner Bros. Discovery filed a lawsuit against Paramount on Friday over the streaming rights for “South Park”
The company is seeking hundreds of millions of dollars from Paramount for what it views as a breach of contract for the exclusive rights to the comedic cartoon, which lives on Warner Bros. Discovery’s HBO Max.
Paramount said in a statement the claims are “without merit” and believes it is still adhering to its contract.

Stan Marsh, Kyle Broflovski, Eric Cartman and Kenny McCormick attend The Paley Center for Media presents special retrospective event honoring 20 seasons of ‘South Park’ at The Paley Center for Media on September 1, 2016 in Beverly Hills, California.
Tibrina Hobson | Getty Images

Warner Bros. Discovery sued Paramount Global looking to enforce the streaming rights of “South Park,” setting the stage for a legal battle between two media behemoths as the streaming wars intensify.
On Friday Warner Bros. Discovery filed a lawsuit against Paramount, South Park Digital Studios and MTV Entertainment seeking hundreds of millions of dollars for what it believes was a breach of contract.

Warner said it agreed in 2019 to pay more than $500 million, or approximately $1.69 million per episode, to license “South Park,” the longstanding cartoon featuring bad-mouthed elementary school children that has been airing on Paramount’s cable-TV network Comedy Central for decades, for its own streaming platform HBO Max.
During the bidding process for the “South Park” rights, the filing said, Paramount allegedly asked whether Warner Bros. Discovery would consider sharing the rights to the show for Paramount’s own streaming service.
“Warner/HBO rejected the proposition as a ‘non-starter,'” according to the lawsuit.
However, Warner alleged in its lawsuit that Paramount went back on its contract and withheld “South Park” specials and other related content. The suit points to Paramount’s own fledgling streaming service, Paramount+, as the reason.
A Paramount spokesperson denied the claims made by Warner in Friday’s lawsuit, adding that Warner has stopped paying licensing fees.

“We believe these claims are without merit and look forward to demonstrating so through the legal process,” a Paramount spokesperson said in a statement. “We also note that Paramount continues to adhere to the parties’ contract by delivering new South Park episodes to HBO Max, despite the fact that Warner Bros. Discovery has failed and refused to pay license fees that it owes to Paramount for episodes that have already been delivered, and which HBO Max continues to stream.”
Although the agreement called for HBO Max to receive the first episodes of the latest season of “South Park” in 2020, Paramount said it notified Warner in March that it would halt production of the season as a result of the pandemic
Warner then claims that “South Park” and its creators moved forward with the production of other types of content, such as two pandemic-themed specials that aired between September 2020 and March 2021.
Warner further alleges the scheme was in the works when Paramount’s subsidiary MTV signed a deal with the “South Park” creators in 2021, which called for exclusive content for Paramount+, reportedly worth $900 million.
“We believe that Paramount and South Park Digital Studios embarked on a multi-year scheme of unfair trade practices and deception, flagrantly and repeatedly breaching our contract, which clearly gave HBO Max exclusive streaming rights to the existing library and new content from the popular animated comedy South Park,” a Warner Bros. Discovery spokesperson said in a statement Friday.
The showdown comes as streaming services have been vying for subscribers and looking to reach profitability in the near future. Media companies have been spending billions of dollars on content to attract customers, and have recently begun cutting costs as increased competition has led to slowing subscriber growth.
This week Warner Bros. Discovery reported a big loss in its quarterly earnings as the company faces a softening advertising market, which has weighed on its revenue. The company said, however, that it added 1.1 million global streaming subscribers, bringing its total to 96.1 million for services including HBO Max and Discovery+. Losses for the streaming business also narrowed to $217 million for the period, “a $511 million year-over-year improvement.”
Warner Bros. Discovery plans to launch a combined HBO Max and Discovery+ streaming service this spring.
Meanwhile, Paramount said last week Paramount+ hit 56 million subscribers in its most recent quarter. The company plans to increase the price of its streaming service when it combines Paramount+ and Showtime later this year. Paramount also said it was affected by the tough ad market.

WATCH LIVEWATCH IN THE APP More

Space Force leadership described a new “mutual fund approach” to its next round of buying rocket launches from companies.
“As opposed to picking a single stock, we pick two different approaches, because we thought that would best allow the government to pivot,” Colonel Chad Melone told press in a briefing Friday.
Space Force is taking a dual-track approach to buying about 70 launches, with more flexible requirements that will increase the number of companies that can compete.

The headquarters of Space Systems Command in Los Angeles, California.
U.S. Space Force / Jose Lou Hernandez

The U.S. military is preparing to buy another round of rocket launches from companies next year, and Space Force leadership says they’re taking a new “mutual fund approach” to the acquisition strategy.
“As opposed to picking a single stock, we pick two different approaches, because we thought that would best allow the government to pivot,” said Colonel Chad Melone, the chief of the U.S. Space Force’s Space Systems Command’s Launch Procurement & Integration division, in a press briefing on Friday.

Earlier this month the Space Force kicked off the process to buy five years worth of launches, under a lucrative program known as National Security Space Launch Phase 3. In 2020, the second phase of NSSL awarded contracts to two companies – Elon Musk’s SpaceX and United Launch Alliance, the joint venture of Boeing and Lockheed Martin – for about 40 military missions, worth about $1 billion per year.

Source: Space X; Red Huber | Orlando Sentinel | TNS | Getty Images

But, with a number of companies bringing rockets to market, Space Force is splitting NSSL Phase 3 into two groups for about 70 launches. Lane 1 is the new tack, about 30 missions with lower requirements and a more flexible bidding process that allows companies to compete for launches as rockets debut over the coming years. Lane 2 represents the legacy approach, with the Space Force planning to select two companies for about 40 missions that have the most demanding requirements.
“Several factors have strongly influenced our strategy, most notably the ever growing commercial launch market, [and] the greater than 50% increase in national security space missions over what we had in Phase 2,” Colonel Doug Pentecost, the Space Systems Command’s deputy program executive officer, told press.

Sign up here to receive weekly editions of CNBC’s Investing in Space newsletter.

Space Force leadership named several companies that can now compete in the dual-track process, including Rocket Lab, Relativity and ABL Space. Pentecost also noted that, a “couple months ago,” Space Systems Command signed a certification plan with Jeff Bezos’ Blue Origin for its New Glenn rocket, with the company aiming to prove it can fly national security missions after three launches.
Pentecost emphasized the cost savings behind the competitive approach of buying launches. For the most powerful rockets, Pentecost said SpaceX’s Falcon Heavy and ULA’s Vulcan rockets “are about half the cost” of what the prior decade’s Delta IV Heavy rockets cost, savings of “almost 50%” for the military to put “the biggest satellites into space.”

“We are saving a ton of money on the high end, while we’re still managing to utilize the commercialized prices on the low end,” Pentecost said.
Separately, Space Force is closely watching the growing demand for commercial launches. Melone said non-military satellite missions would need to be “on the extremely high side” of current projections to limit Space Force’s plans, either through the availability of launch ranges or companies’ production capacity.
Already, companies are hitting unprecedented annual launch rates. Space Force projects its Eastern Range in Florida will see 92 launches in 2023, up from 57 in 2022, and its Western Range in California will have 42 launches in 2023, up from 19.

WATCH LIVEWATCH IN THE APP More

Luxury electric vehicle maker Lucid said during its fourth-quarter earnings report that it had “over 28,000” reservations for its Air sedan as of Feb. 21, down from “over 34,000” reservations in November.
It plans to build just 10,000 to 14,000 vehicles in 2023, despite factory capacity to build more.
Lucid stock has sold off since its earning report, as demand concerns raised questions for investors.

People test drive Dream Edition P and Dream Edition R electric vehicles at the Lucid Motors plant in Casa Grande, Arizona, September 28, 2021.
Caitlin O’Hara | Reuters

Luxury electric vehicle maker Lucid appears to have a demand problem.
The company said during its fourth-quarter earnings report Wednesday that it had “over 28,000” reservations for its Air sedan as of Feb. 21. That was a surprise, given that the company had claimed “over 34,000” reservations in November and delivered fewer than 2,000 vehicles in the fourth quarter.

Even more surprising: Lucid said it plans to build just 10,000 to 14,000 vehicles in 2023, far fewer than the roughly 27,000 Wall Street analysts had expected — and than the roughly 34,000 vehicles per year that Lucid’s factory is set up to build.
Shares of the company have fallen about 15% since the Wednesday report.
Lucid faced a rough road getting the Air into production. The company spent much of the first half of 2022 scrambling to secure key components and untangling logistics snags. Now, with production running more or less smoothly, it seems to be facing a new problem: Not enough of its reservations are converting to orders.
CEO Peter Rawlinson acknowledged as much during the earnings call when he reminded listeners that reservations aren’t binding.
“We’ve solved production. That is not the gating issue here now,” Rawlinson said. “My focus is on sales. And here’s the thing: We’ve got what I believe to be the very best product in the world. … Too few people are aware of not just the car, but even the company.”

Rawlinson went on to say he believes that to be an “entirely solvable problem” and plans to focus on “amplifying customer awareness” in 2023.
More marketing might help. But clearly, demand for Lucid’s vehicles isn’t materializing as quickly as the company expected, which raises some tough questions for investors.
First, how big is Lucid’s potential market? Any estimate of how much Lucid could grow has to start with an estimate of the “total addressable market,” and it appears the company’s estimates on that front may have been too rosy, given that its factory is set up to produce many more vehicles than it’s building now.
Running an auto factory well below capacity isn’t exactly a route to profitability, as Chief Financial Officer Sherry House conceded during Lucid’s earnings call.
“As we produce vehicles at low volumes on production lines designed for higher volumes, we have and we will continue to experience negative gross profit related to labor and overhead costs,” House said.
That leads to a second, related question: How long will Lucid have to run its factory at a loss? Or, put another way, how long will it take Lucid to get to profitability — and how much money will it have to raise between now and then?
Bank of America analyst John Murphy has long been bullish on Lucid, but in a note to investors following Lucid’s earnings report, he cut the bank’s rating on the stock to hold, from buy. Murphy wrote that he now thinks Lucid won’t break even before 2027, and that the company will need to raise more capital sooner than he had previously expected.
The good news is that Lucid has a deep-pocketed investor. Saudi Arabia’s Public Investment Fund owns about 62% of Lucid, and has shown — most recently in December, when it invested an additional $915 million — that it’s still willing to fund the company. As long as it has the Saudi fund’s backing, Lucid should be able to keep going.
But the road to profitability — and to a big payday for Lucid’s investors — is now looking longer.

WATCH LIVEWATCH IN THE APP More

The “Rust” movie production company has settled a civil suit brought by New Mexico’s Occupational Health and Safety Bureau regarding the 2021 fatal movie-set shooting.
The producers have agreed to pay a reduced fine of $100,00, down from the original $136,793 penalty.
The state agency also downgraded the case from the most severe classification, “willful-serious,” to “serious.”

A worker, who said he came to pick up some equipment, walks toward security guards at the entrance to the Bonanza Creek Ranch film set in Santa Fe, N.M., Monday, Oct. 25, 2021.
Jae C. Hong | AP

Producers of the “Rust” film starring Alec Baldwin announced Friday they will pay a reduced penalty of $100,000 to New Mexico’s Occupational Health and Safety Bureau, settling a civil investigation into the movie-set shooting death of cinematographer Halyna Hutchins.
The final penalty was lowered from an original fine of $136,793 issued last April. The state agency also downgraded the case from the most severe classification, “willful-serious,” to “serious.” The settlement will be finalized 20 days after it is submitted.

“Our top priority has always been resuming production and completing this film so we can honor the life and work of Halyna Hutchins,” said Melina Spadone, an attorney representing the “Rust” production company, in a statement. “Settling this case rather than litigating is how we can best move forward to achieve that goal.”
The producers are planning to continue filming “Rust” this spring and also announced that a documentary on Hutchins will begin production.
New Mexico authorities conducted a series of witness depositions on the matter and released a report in April claiming that the film’s producers had “failed to adhere” to industry-wide firearm safety standards.
The evidence collected in the investigation has been used by defendants in other cases related to the shooting and to “correct misinformation” in the media, according to a Friday announcement.
The announcement comes a day after Baldwin, who was handling the gun that killed Hutchins, pleaded not guilty and waived his first court appearance, which was scheduled to take place Friday. Along with starring in the film, Baldwin is also a producer.
Baldwin and the film’s armorer, Hannah Gutierrez-Reed, are facing charges of involuntary manslaughter in an ongoing criminal case. Gutierrez-Reed made her first court appearance on Friday. Baldwin is also facing a civil lawsuit from Hutchins’ parents and sister.

WATCH LIVEWATCH IN THE APP More

Ford is suspending production of its electric F-150 Lightning pickup for another week following a battery issue that resulted in one of the vehicles catching fire.
Ford last week said it expected vehicle assembly to be down through at least this week, as engineers determined the root cause of the issue and implemented changes to production.

Ford CEO Jim Farley announces at a press conference that Ford Motor Company will be partnering with the worlds largest battery company, a China-based company called Contemporary Amperex Technology, to create an electric-vehicle battery plant in Marshall, Michigan, on February 13, 2023 in Romulus, Michigan.
Bill Pugliano | Getty Images News | Getty Images

DETROIT — Ford Motor is suspending production of its electric F-150 Lightning pickup for another week following a battery issue that resulted in one of the vehicles catching fire early this month.
Ford said Friday its battery supplier, SK, has started building battery cells again at a plant in Georgia but it will take time “to ensure they are back to building high-quality cells and to deliver them to the Lightning production line.”

“The teams worked quickly to identify the root cause of the issue,” Ford said in a statement Friday. “We agree with SK’s recommended changes in their equipment and processes for SK’s cell production lines.”
Ford last week said it expected Lightning production to be down through at least this week, as engineers determined the root cause of the battery issue and implemented improvements to the manufacturing process.
The fire occurred Feb. 4 in a holding lot during a pre-delivery quality check while the vehicle was charging, followed by Ford suspending production and issuing a stop-shipment of the vehicles to dealers. Ford said engineers determined there was no evidence of a charging fault.
Ford said it is not aware of any incidents of this issue in vehicles that have already been delivered to customers and dealers.
The F-150 Lightning is being closely watched by investors, as it’s the first mainstream electric pickup truck on the market and a major launch for Ford.
The battery issue adds to ongoing “execution issues” detailed to investors earlier this month by Ford CEO Jim Farley that crippled the automaker’s fourth-quarter earnings.

WATCH LIVEWATCH IN THE APP More

Vice Media CEO Nancy Dubuc told staffers in a memo on Friday she’s stepping down after five years at the helm.
Dubuc is leaving shortly after Vice restarted its sale process, as CNBC previously reported.
Like its digital media peers, Vice has faced challenges in recent years due to shrinking audience numbers and advertising.

Nancy Dubuc, chief executive officer of Vice Media
Christopher Goodney | Bloomberg | Getty Images

Nancy Dubuc notified Vice Media staffers on Friday that she’s stepping down from her post as CEO after five years at the company. It was not immediately clear who would replace her.
“Today Vice has an incredible opportunity in the hands of a new management team who are looking to harness the businesses we built and grew and to lay the groundwork for the future,” Dubuc said in Friday’s email. “I know you are among the most resilient, creative, and determined talent in the business and your futures are bright and hopeful.”

Dubuc joined Vice in 2018 after leaving her post as CEO of A+E Networks, where she had worked for 20 years. She succeeded Vice co-founder Shane Smith, who remained as the company’s executive chairman. A+E Networks and Vice came together in a joint venture to create the channel Viceland.
“Nancy joined VICE at a pivotal time and put in place an exceptional team that has positioned the company for long-term success,” Vice’s board of directors said in a statement Friday. “We thank Nancy for her many contributions and will soon announce new leadership to guide VICE forward into its next stage of growth and transformation.”
Dubuc’s departure comes as Vice — like its digital media peers — is facing ongoing challenges with shrinking audience numbers and advertising. In addition to growing competition for ad dollars from tech giants like Google, the media industry as a whole has been contending with a slowdown in the advertising market as macroeconomic conditions have led to uncertainty and a pullback in spending.
Vice recently restarted its sale process, CNBC reported last month. The company, which had been valued at $5.7 billion in 2017, is now likely to fetch a price tag below $1 billion, after initially looking for a valuation between $1 billion and $1.5 billion, CNBC reported.
Vice hired advisors last year to facilitate a sale process of some or all of its business, and it had been nearing a deal with Greek broadcaster Antenna Group until the talks recently stalled. Now, Fortress Investment Group, one of Vice’s lenders, is a driving force in the sale process.

Still, Vice ended 2022 with a slight gain in revenue, although the business deteriorated among the macroeconomic headwinds, CNBC previously reported. Some of its units did post a profit last year, but overall the company was unprofitable for 2022.
Read the full memo from Dubuc:

Dear Vice Media Group Team,
I am writing today with bittersweet news. It’s been an exhilarating five years since joining you at Vice, and I am incredibly proud of the important and long-lasting accomplishments we have made together. We have transformed this Company from a disparate brand to a fully formed, diversified media company complete with a thriving news organization hosting a collection of some of the most recognizable consumer brands. Your commitment to excellence, progress and ethics is unparalleled and the relationships we have built are everlasting. Which is why as the anniversary of my tenure approaches, it is so difficult to share that I have made the decision to move onto the next chapter.  
I am proud to leave a Vice better than the one I joined. Together we racked up incredible wins while tackling unprecedented macroeconomic headwinds caused by the pandemic, the war in the Ukraine, and the economy all which forced us to pivot, refocus and pivot again. Despite all this the Vice, Vice Studios, Pulse, as well as Virtue, R29, i-D and Unbothered brands are strong. We reduced overhead by half and yet improved the quality of our revenues through both increased profitability and growth of returning revenues. As we face new headwinds in the marketplace Vice is now less ad dependent, and our gross margins have more than doubled.
Most important, while there’s still much work to be done, Vice is a more diverse and inclusive environment than ever. 
Today Vice has an incredible opportunity in the hands of a new management team who are looking to harness the businesses we built and grew and to lay the groundwork for the future. I know you are among the most resilient, creative, and determined talent in the business and your futures are bright and hopeful. 
Remember what I try to remind you, and that is to appreciate how far you’ve come. The accomplishments are far and wide— from new businesses, completely rebuilt operations and countless awards for brave work. But also remember to look ahead to the possibilities. 
I’d also like to thank Shane and Suroosh for their trust and the many board members and investors along the way. I will cheer you on from the side-lines.
Left foot, right foot.
Nancy

WATCH LIVEWATCH IN THE APP More

Workers are back at the office and spending on food and drink three days a week.
But that’s not enough for big city bars and restaurants, which have been forced to cut hours, rethink their business models and even close.
Hybrid work is costing cities and their businesses billions of dollars a year, according to new research.

Commuters arrive into the Oculus station and mall in Manhattan on November 17, 2022 in New York City.
Spencer Platt | Getty Images

Many restaurants and hotels in city downtowns are seeing sales come back to pre-pandemic levels — but only on Tuesdays, Wednesdays and Thursdays.
In cities such as New York, Los Angeles and Atlanta, the three-day in-person work week has posed challenges for hospitality businesses. With fewer workers in offices on Mondays and Fridays — which for some businesses were their strongest sales days — many businesses have been forced to shift work schedules or launch initiatives to pull in customers at the start and end of the week.

Amali, a restaurant on the edge of midtown Manhattan, is pulling in as little as a quarter of midweek business on Mondays and Fridays, said managing partner James Mallios.
Hotels are also seeing slower starts and ends to the week for business travelers. However, hotels throughout California have been seeing more instances of combined business and leisure travel, according to Pete Hillan, a partner at public relations firm Singer Associates, which has clients in the hospitality industry.
WFH Research, which conducts surveys and research projects on working arrangements and attitudes, released findings last week showing that remote work is costing cities billions a year. According to data collected from June to November, the per-person reduction in spending in New York City was $4,661, followed by $4,200 in Los Angeles and $4,051 in Washington, D.C. The study outlined a dozen cities with a reduction in yearly spending of over $2,000 per person.

In-person work days declined the most, 37%, in Washington, compared with pre-pandemic levels, followed by Atlanta at 34.9% and Phoenix at 34.1%. The information, finance, and professional and business services sectors lead in working from home.
According to WFH Research co-founder Jose Maria Barrero, 28.2% of employees are hybrid — working some days in the office and some days remotely — compared with 12.7% who are fully remote. Although 59.1% of workers are full-time on site, hospitality businesses catering to office workers are still struggling to make ends meet, Barrero said. WFH Research found that just 5% of paid work hours were remote pre-pandemic.

Andrew Rigie, executive director of the New York City Hospitality Alliance, said people are more likely to spend more on breakfast or lunch, or go out to happy hour after work, when they are in commercial districts, compared with the amount they spend at restaurants and bars in their own neighborhood when they work remotely.
The demand for corporate dinners and catered meals has in many cases not gone away, though.
“We have found that there is significant demand from the business community, both from a lunch standpoint but really entertaining happy hour later, to many degrees at a higher level than pre-pandemic,” said Steve Simon, partner of Atlanta-based Fifth Group Restaurants.

From city centers to suburbs

This month, the only Ruth’s Chris Steakhouse location in Manhattan announced it would close in April, and numerous midtown Manhattan restaurants, including upscale Thai-inspired Random Access, have shuttered.
“Even though you may be busy on Wednesday and Thursday, your Mondays and Fridays may be very slow,” Rigie said. “If someone was to walk by a restaurant around lunch or dinner time on a Thursday, they may say, ‘Wow, that restaurant’s packed, they’re so busy,’ but it’s not like that every single day.”

The Bureau of Labor Statistics found in a study that increased remote work results in a reduction in foot traffic for urban centers. A 10% decline in foot traffic in a census tract leads to a 1.7% decline in employment for food services and accommodation, as well as a 1.6% decline in wholesale trade and retail trade employment.
Areas with positive increases in traffic had employment increases in the same sectors.
“Especially because the census tracts that had increases in foot traffic are more of the suburbs, moving away from the dense urban parts, then what that’s implying is that employment seems to be doing better in the restaurants, bars, and retail trade in these more suburban, less dense census tracts,” said Michael Dalton, a research economist at the bureau who led the study, which was published in August.
WFH Research’s Barrero said significant spending has moved to locations outside of downtowns, hurting city centers.
“To the extent this shifts away from New York City to adjacent counties within the metro area, then that means a loss of sales tax for the city,” he said. “That goes hand in hand with a loss in transit ridership revenues and so on.”

Over the past six months, Barrero said, data has shown stable amounts of total days worked from home for the aggregate economy just shy of 30%. There was a reduction in remote work in January to about 27% from 29%, though he predicts remote work levels will not drop below 25% in the near future.
“The bad news for these restaurant owners and so on is that I don’t think we’re going back to normal, and we’re probably kind of very near to where the new normal is,” Barrero said.

Restaurant resiliency

Rigie, of the New York City Hospitality Alliance, said full-service restaurants may have more consistent business in the long term, due to tourists and people who go to shows, than fast-casual, limited-service restaurants, which cater more to office crowds. However, full-service restaurants, which have higher overheads, will continue to deal with staffing shortages, he said.
“If employees are realizing, why am I at this restaurant if a lot of nights are not as busy and I’m not earning as much, they may go to a restaurant in another neighborhood where it’s busier earlier in the week,” he said.
Emily Williams Knight, CEO of the Texas Restaurant Association, said restaurants in Texas downtowns are seeing two different types of workforce recoveries. She said Houston reported that office space is 60% full with a 30% vacancy rate, while Austin has led the nation in the return to in-person work.
On a recent trip to downtown Houston, Williams Knight said she “had never seen streets empty as I saw them in the middle of the week, in the middle of the day.” She added that the return of conventions and business travel has been particularly slow.
Houston and Dallas, which have average commute times of almost half an hour, have experienced small lunch and happy hour crowds on weekdays over the past few months. Combined with four-decade-high inflation and labor costs up over 20% the last two years, some restaurants have been forced to close or relocate, she said.
“When you had five, six, seven restaurants within blocks of each other, and you could choose, you would make an attempt to go into the city and eat at your favorite restaurant,” Williams Knight said. “Now, that lack of selection is also keeping people at home, and all of those sort of dovetail into that spending isn’t happening.”
Nick Livanos, proprietor of Livanos Restaurant Group, has two restaurants in Manhattan and two in Westchester. While the Westchester restaurants have more consistent lunch and dinner services, he said, Oceana in Midtown has “extremely busy” Tuesdays, Wednesdays and Thursdays, but much weaker Mondays and Fridays.
Molyvos, the group’s upscale Greek restaurant, moved out of Midtown in November into a smaller space in the more residential Hell’s Kitchen. He said the new location has attracted longtime residents who are more loyal, like the Westchester crowds.
Rigie said downtowns need to focus on appealing to not just office workers but also tourists and residents of nearby neighborhoods, while also modifying hours, cutting expenses and establishing relationships with local businesses as remote work continues.
And despite discussions about repurposing many low-occupancy office buildings into residential units, restaurants may not benefit from that for years.
A handful of independent single-unit restaurants in Houston and Dallas are moving to the suburbs.
Tracy Vaught, who owns five restaurants in the Houston area, said business from office workers at downtown locations only picks up later in the week. Four of her restaurants are now closed Mondays, and another is closed Tuesdays and Wednesdays for lunch. She anticipates business will pick up at all locations as spring approaches.
“The suburbs’ restaurants are suffering from the same things that the downtown or the office park-type restaurants are suffering, and that is that not everybody’s back to work,” Vaught said.

WATCH LIVEWATCH IN THE APP More

Shares of pizza chains Domino’s and Papa John’s both fell after both reported soft sales figures.
Domino’s missed analyst estimates on U.S. same-stores sales and total quarterly revenue. Papa John’s came up short on sales in North America.
Both companies have raised prices to offset rising food and labor costs.

Medianews Group/reading Eagle Via Getty Images | Medianews Group | Getty Images

Domino’s Pizza and Papa John’s both fell in pre-market trading after reporting mixed earnings on Thursday morning.
Domino’s missed analyst estimates on U.S. same-store sales and total revenue for the quarter. Domino’s also lowered its outlook. Papa John’s posted softer-than-expected North America sales.

Domino’s stock closed down more than 11%, while Papa John’s fell 6%.

Both pizza companies have raised prices recently to offset rising food, transportation and labor costs. Domino’s reported wavering demand amid a national driver shortage. Last October, Domino’s executives announced plants to raise prices around 7% in the fourth quarter, including spiking its Mix & Match deal from $5.99 to $6.99.
Here’s how Domino’s did, compared to analysts’ estimates, according to Refinitiv:

Revenue: $1.39 billion vs. $1.44 billion expected
Adjusted earnings per share: $3.97 vs. $3.94 expected

The Michigan-based company said U.S. same-store sales increased 0.9%, coming in much lower than analyst estimates of 3.4%, according to estimates compiled by StreetAccount. This was a 0.8% decline for fiscal year 2022.
U.S. company-owned stores reported revenues of $117 million, falling short of StreetAcount estimates of $129.3 million.

The company cut its two-to-three-year sales outlook to a range of 4% to 8% growth from 6% to 10%, citing macroeconomic headwinds weighing down on its domestic delivery business.
Revenue grew 3.6% in the fourth quarter of 2022 compared to the year-earlier period, citing higher supply chain revenues as a result of increases in market basket pricing to stores.
This month, Domino’s launched loaded potato tots with three flavors, which some analysts think could raise sales.
“We experienced significant pressure on our U.S. delivery business in 2022 and focused our efforts on creating solutions,” said CEO Russell Weiner. “We also drove continued momentum in our U.S. carryout business and achieved strong international store growth.”

Papa John’s pizza delivery bikes seen parked outside its branch in London.
Dinendra Haria | SOPA Images | Lightrocket | Getty Images

Papa John’s fourth quarter results topped Wall Street’s expectations. Total revenue was down less than 1% from the company’s record fourth quarter last year. Revenues would have been up 3% if not for strategic refranchising for dozens of restaurants.
Here’s how Papa John’s did, compared to analysts’ estimates, according to Refinitiv:

Revenue: $526.2 million vs. $523.8 million expected
Adjusted earnings per share: $0.71 vs. $0.66 expected

The Louisville-based company missed estimates on North American company-owned restaurant sales, reporting revenues of $172.2 million versus an expected $172.7 million, according to estimates compiled by StreetAccount. North America comparable sales were up 1% from a year ago.
The company said it expects North America comparable sales to grow annually between 2% and 4%, according to executives. For 2023, it expects growth to come in on the lower end of that range, they added.
Both Domino’s and Papa John’s earnings come after stronger than expected earnings at McDonald’s and Yum! Brands, both of which beat quarterly earnings and revenue estimates this quarter.

WATCH LIVEWATCH IN THE APP More