Some of the more notable and recent
Chapter 11 proceedings have included
Buffets Restaurants Holdings, Inc.,
whose restaurants included Old
Country Buffet, Home Town Buffet,
Ryan’s, and Tahoe Joe’s Famous
Steakhouse (Buffets also filed Chapter
11 in 2008); Perkins & Marie Callender’s
Inc. , whose restaurants included
Perkins Restaurant & Bakery and
Marie Callender Pie Shop; Friendly Ice
Cream Corp.; Real Mex Restaurants,
Inc., whose El Torito, Chevy’s, and
Acapulco restaurants comprised the
largest full-service Mexican restaurant
chain in the U.S.; SSI Group Holding
Corp., whose restaurants include Souper
Salad and Grandy’s; and Sbarro, Inc.
A multitude of unique challenges have
created extreme pressure on both the
upscale and casual dining segments
of the restaurant sector, including:
• A decline in aggregate consumer
spending, leading to substantially
lower guest counts.
• Trading down in price
points by customers.
• Overexpansion driven by growth
in chain concepts. Restaurant
store count in the U.S. grew by
more than 20 percent from 1996
to 2008, according to the U.S.
Bureau of Labor Statistics.
• Rising food costs attributable to
broad-based commodities inflation
• The high capital expenditure
burden required to maintain the
freshness and relevance of a brand.
• Leveraged capital structures and
transactions, both undertaken
at peak valuations, creating a
diminished safety net in the face
of a downturn in revenues.
In preparing for a bankruptcy
proceeding, restaurant operators
must maintain an ongoing supply of
goods and services after the filing. Any
interruption in operations could be
devastating to a concept’s reputation,
cash flows, and/or employee morale.
As such, operators must immediately
educate their supplier base regarding
the impact of a Chapter 11 filing to
prevent supply disruptions and to
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