The post-pandemic operating environment has forced another restaurant chain into bankruptcy.
This time it’s World of Beer Bar & Kitchen, which a decade ago was one of the country’s fastest-growing chains but which struggled coming out of the pandemic, declared Chapter 11 bankruptcy protection late last week.
The Tampa-based company has $25.6 million in secured debt with Synovus Bank and has closed 14 locations over the past year, leaving the chain with 33 restaurants, mostly in the Southeast. Just over half of the chain’s locations are franchised-owned.
The company was founded in 2007 to take advantage of the explosion in craft beer. It was thriving by 2013, when it had $56 million in system sales and was one of the 10 fastest-growing chains in the U.S. It would have $85.5 million in system sales by 2018, according to data from Restaurant Business sister company Technomic.
But the company also faced a difficult relationship with franchisees. In court documents, the company said that “many franchisees chose to get in on the craft beer explosion without having sufficient experience in the industry and then operated their franchise as a passive/secondary business.”
That company changed the operating standard to new locations to a spec kitchen as it evolved into a food and spirit program. World of Beer lost multiple legal cases, costing it “millions of dollars in lost royalties and legal fees.”
The pandemic did World of Beer no favors. The company said that 15% of its locations did not resume operations after the COVID rebound.
World of Beer borrowed $8 million in mid-2020 under the Main Street Lending Program to open three new locations. “Unfortunately, the operating environment for these locations was poor,” the company said in court documents. Each of them generated negative cash flow and have since closed. But the leases on all three locations drained the organization of cash.
Meanwhile, the restaurant operating environment has become challenged, as consumers have cut back on dining. Many restaurants are also struggling with inflation and thinned margins.
World of Beer said it could close more locations to focus on profitable units, saying that the concept is sustainable, particularly after a restructuring.
But this is the latest in a string of restaurant chain bankruptcies, and near bankruptcies. Many companies exited the pandemic with weak finances, and a difficult post-pandemic sales and profit environment has forced many to file for bankruptcy.
Red Lobster, Rubio’s, Tijuana Flats and several small chains and franchisees have declared bankruptcy.
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