The parent of Logan’s Roadhouse and Old Chicago has notified its furloughed employees that they have all been terminated, with healthcare benefits ended as of March 31.
The move comes after Hazem Ouf was fired as CEO of the company, CraftWorks Holdings, for passing along $7 million in sales taxes to states where the company’s various brands were in operation. The funds were passed along “surreptitiously,” without the knowledge and prior approval of court-appointed supervising parties, according to a court filing.
CFO Jim Lebs was also dismissed, the documents indicate.
Court supervisors say they asked states to refund the taxes that were passed along, and received about $360,000 in response.
The collected taxes were forwarded after CraftWorks said it was “mothballing” all 261 of its restaurants because it lacked the funds to keep them in operation. At that time, virtually all of the company’s employees were furloughed, though several told Restaurant Business that they were not informed at the time that their restaurants would possibly not reopen.
A number of states have deferred collection of the taxes as a way of increasing the cash flows of small businesses such as restaurants.
Casual-dining veteran Marc Buehler is now CEO, according to an email forwarded to Restaurant Business by employees.
The communication explains that health-insurance coverage was terminated, leaving the discharged employees without access to COBRA, the federal program that extends coverage for a short time to workers who lose their private insurance.
The employees are advised to check their state’s healthcare marketplace to shop for coverage.
Other executives have apparently been retained in addition to Buehler. “Our small team continues to make progress consolidating the company and preparing for a day, hopefully soon, when we can return to the business of serving our communities across all our great brands,” Buehler wrote.
CraftWorks filed for Chapter 11 bankruptcy protection in early March, before the COVID-19 pandemic had festered into a crisis. It subsequently alerted the federal bankruptcy court in Delaware that it could not secure funds to keep its operations even partially open, and would have to close every store. It held open the possibility of reopening the units at a later date.
In addition to Logan’s and Old Chicago, CraftWorks’ concepts include Rock Bottom Restaurant & Brewery, Gordon Biersch Brewery Restaurant Group and ChopHouse.