Restaurants Unlimited declared bankruptcy Sunday and closed six units, as the Seattle-based casual-dining operator faced dwindling cash reserves after struggling for three years to find a buyer amid heavy debt costs.
The company in legal filings largely blamed rising minimum wages in many of its biggest markets, along with costs from two restaurant openings that didn’t work out as well as planned.
Restaurants Unlimited was founded in 1968 and currently operates 35 locations in several brands including Kincaid’s and Palomino. It was sold to private-equity firm Sun Capital in 2007.
According to legal filings, Restaurants Unlimited has more than $39 million in secured debt and another $7.6 million in unsecured debt to vendors.
The company said it has just $150,000 in cash on hand and “lacks access to needed liquidity other than cash flow from operations.”
In legal filings, the company said that higher minimum wages in cities such as Seattle, San Francisco and Portland, Ore., cost it $10.6 million in higher wages through the end of its most recent fiscal year, and it expects more higher minimum wages in the coming year.
But it also blamed “the general national trend away from casual dining” for lowering sales, which declined 1% in the past fiscal year.
Restaurants Unlimited also said that it opened two new restaurants, in Bellevue, Wash., and Seattle. The openings cost the company $10 million, but “the anticipated foot traffic and projected sales at these locations did not materialize.”
With higher costs from rising minimum wages, the company said that it “experienced significant operating losses at these locations.”
Restaurants Unlimited began looking for a buyer in 2016 but could not get any interested party past the due diligence portion of the sale process.
The company continued to look for buyers for the next three years but failed each time to reach an agreement.
Restaurants Unlimited then received forbearance agreements from its lenders, which the company said increased its interest rate and restricted its ability to borrow. With draining cash and rising costs, the company hired a chief restructuring officer this year and has not made a debt payment since January.
It then closed six unprofitable locations: Palomino locations In Indianapolis and Bellevue; Prime Rib & Chocolate Cake in Portland; Henry’s Tavern in Plano, Texas; Stanford’s in Walnut Creek, Calif.; and Portland Seafood Co. in Tigard, Ore.
Restaurants Unlimited believes the bankruptcy process can prompt a sale. The company said in filings that it has interest from “multiple strategic and financial buyers.”
Heather Lalley contributed to this report.