Sbarro files for bankruptcy as mall traffic dwindles
The food-court pizza chain seeks Chap. 11 protection for the second time in three years, facing higher costs and declining numbers of shoppers.
Sbarro LLC, the 800-restaurant U.S. pizza chain, filed for bankruptcy protection for the second time in three years as customer traffic slowed in the shopping-mall food courts where many of its stores do business.
The company listed assets and debt of as much as $500 million each in a Chapter 11 petition filed today in U.S. Bankruptcy Court in Manhattan. Melville, New York-based Sbarro said in a statement that it will use court protection to quickly reorganize and close many underperforming stores under a plan already supported by holders of most of its debt.
“The agreement among the company’s lenders is an indication of the support and confidence they have in the growth strategies developed by the new management team over the past nine months,” Chairman and Chief Executive Officer David Karam said in the statement.
A group of lenders will provide $20 million in financing, and the reorganization plan will eliminate $140 million in debt, Sbarro said. The filing won’t affect its 600 franchises worldwide.
The Sbarro family started the company 58 years ago after moving to Brooklyn, New York, from Naples, Italy. MidOcean Partners acquired Sbarro in January 2007 for $417 million. The chain reported losses in 2008 on higher costs for ingredients such as cheese, flour and pasta and filed for bankruptcy in 2011.
Karam, previously an executive at fast-food chain Wendy’s Co., led a comeback effort after joining Sbarro as CEO in 2013. To offset slow growth in the U.S., where muted consumer spending took a toll on Sbarro’s stores, the company opened 81 new locations overseas in 2013. In February, it closed 155 stores in North America.
Restaurant chains including Bennigan’s and Steak & Ale, both owned by Metromedia Restaurant Group, and Buffets Holdings Inc. filed for bankruptcy in the three years before Sbarro’s 2011 filing, hurt by the worst U.S. economic slump since the Great Depression.
Uno Restaurant Holdings Corp., also a pizza chain, entered bankruptcy in January 2010. Midland Food Services LLC, the operator of 92 Pizza Hut restaurants in six states, and Commissary Operations Inc., a distributor of food and supplies to chains, also sought court protection.
Sbarro’s first trip through bankruptcy began in April 2011 and ended in November of that year. Under that reorganization, first-lien lenders gained ownership and the company eliminated 70% of its debt. The earlier Chapter 11 filing listed assets of $471 million and debt of $486.6 million.
Unsecured creditors with as much as $173 million in claims got nothing in the first bankruptcy, as an auction drew no bids and was canceled.
Standard & Poor’s said in July that Sbarro’s debt was unsustainable after it borrowed to fund cash operating losses. S&P called the pizza market fragmented and competitive. Sbarro is also vulnerable to declines in shopping-mall traffic and the volatility of ingredient prices, the ratings company said.
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Perhaps they should get out of shopping malls, travel plazas and airports where they can get away with charging $5-6 per slice. It's obvious that even at that cost it won't support their leases.
What a surprise....a pizza slice is $6.00 in the airport $8?
last time I went there I learn the true meaning of SCREWED!
and the funny part is that at $6 a pizza they still pay worker min wage!
Hi can I have 6 slives and 6 large Cokes? Sure that will be $226 dollars.
Why is this being blamed on the cost of ingredients and poor economy? Perhaps people do not want a 2000 calorie slice of stuffed pizza.
Sell all their assets pay back the debt holders. Let them die. Support your local restaurants and markets.
Who let the stupids out of their cages?
A family owned & operated business does good for 58 years. A big hedge fund/investment house takes over and bankrupts it in less than four years...........
My Dad owns a small trucking company (27 trucks & trailers) his company hauls mostly food type products, a family owned company he has been working with for 45 years was sold/bought out by a big hedge fund/investment house 2.5 years ago, at the time of sale & before the company was solid & quite profitable, the big boys come in & say "now you are going to go things our way" well........they have managed to alienate most of their supplier's (the ones that aren't PO'ed they own) anyway long story short the directors have filed for bankruptcy, I guess "their way wasn't better."
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