On Monday, two restaurant companies, Bar Louie and the owner of Village Inn and Bakers Square, filed for federal debt protection, adding to a growing list of restaurant chains that have had to seek court help in disposing of their debts. Here is a look at some of these recent bankruptcy filings as well as the explanations given for their problems.
One of the more surprising bankruptcy filings in recent vintage, the casual-dining chain filed for federal debt protection this week and closed 38 locations. It blamed overexpansion for its filing—specifically, the company built a lot of new units using a combination of debt and cash flow, which kept it from spending on maintenance and upgrades at some locations. That led to inconsistency and some bad sales.
The 300-unit chain closed 44 locations and filed for debt protection last week with $65 million in secured debt. The burger chain filed despite an equity infusion two years ago that cut its debt in half, as well as an all-you-can-eat offer that temporarily lifted sales last year. Krystal said last year it wants to sell up to 150 locations to franchisees.
A law enacted this week bans hidden fees but allows restaurants to continue levying surcharges if customers get a heads-up and the money goes to employees.
The development agreements represent a return to unit growth for the fast-casual Mexican chain under new owner Dine Brands, the parent of Applebee's and IHOP.