Financing

Bakers Square, Village Inn owner files for bankruptcy

American Blue Ribbon Holdings closed 33 locations as it continues to lose money.
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The owner of Bakers Square and Village Inn filed for federal bankruptcy protection Monday and closed 33 locations, blaming high wages and growing competition for declining sales and higher operating losses.

American Blue Ribbon Holdings does not have any secured debt, according to court documents, but said that a related company called ABRH would no longer fund the company’s losses.

A press release on Monday said American Blue Ribbon filed for bankruptcy to restructure under “a healthy core of restaurants.” The company said it is exploring “a variety of strategic and structural alternatives to best position the company for success in the future.”

The 33 restaurants represented a quarter of the locations American Blue Ribbon operated before filing for bankruptcy. Following the closures, the company operates 97 restaurants, 75 of which are Village Inn locations. Franchisees own and operate another 84 Village Inn locations, while Bakers Square has 22 restaurants.

Pies represent 30% of Bakers Square’s sales.

American Blue Ribbon has $14 million in unsecured claims, including unpaid rent and litigation claims, according to a filing.

The company is complex and has its roots in the 2009 acquisition of what was then called Vicorp by Fidelity National Financial. Vicorp filed for bankruptcy in 2008, when Village Inn and Bakers Square had nearly 400 locations—meaning the company’s unit count has been cut in half over the past decade.

ABRH, another Fidelity-owned company that operates O’Charley’s and Ninety Nine Restaurants, provides a lot of support services to American Blue Ribbon, without which the company’s business operations “would almost immediately cease.”

American Blue Ribbon does “not have the contracts, infrastructure or human resources to independently maintain their operations absent the services and staffing provided by ABRH.”

In a filing, Blue Ribbon blamed its problems in growing competition from newer family-dining concepts, ad spending by large family-dining concepts—presumably Denny’s and IHOP—and growing competition from grocers.

Rising labor costs have also caused problems in Arizona, Colorado, Illinois and Minnesota, where 67 of Blue Ribbon’s then-130 locations were located. The company estimates labor has had a $2 million impact on the company over the past two years.

American Blue Ribbon generated “sustained large operating losses” over the past two years, including $11 million in 2018 and $7 million in 2019. The company was set to cut those losses further, cutting a support center and selling a trio of restaurant properties.

ABRH had been funding American Blue Ribbon’s losses but said it would no longer do so, which prompted the bankruptcy filing.

Cannae Holdings, which is now American Blue Ribbon’s majority owner, has provided $20 million in financing to get the company through the bankruptcy process.

The bankruptcy filing is one of two filed by restaurant chains today, the other being a filing by Bar Louie. The two follow the bankruptcy of burger chain Krystal last week.

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