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.
The trade group is calling for changes in disclosure rules before people buy a franchise. It comes as federal regulators examine rules for franchise companies.