Fast foods are a staple of modern American life and can be widely found, including in the food courts in most malls. Many shoppers thus know the Sbarro pizza chain, which has franchises across the United States, including in Maryland. The company has struggled in recent years, however, and has closed hundreds of franchises. Now the company has just won approval of a bankruptcy plan to help it cut debt from more than $148 million to about $20 million.
In a recent ruling by a U.S. Bankruptcy Court in New York, the judge approved Sbarro’s second filing in three years, this one under Chapter 11 proceedings. The company has cited decreasing foot traffic at shopping malls and the increasing popularity of competitors’ fast-casual restaurants as the main reason for its diminishing volume. Founded in 1956, Sbarro’s has tried to adapt to meet the challenge of such recent competitors as Panera Bread Company and Chipotle’s Mexican Grill, which offer higher-quality food and atmosphere than most traditional fast-food chains.
The company’s restructuring plan is supported by its creditors after the company tried but failed to auction off assets to pay its debts; the auction had no bidders. Under the new plan, a large chunk of Sbarro’s loan debt will be converted into equity in the reorganized company. The company also plans to cut expenses and save money by closing more stores and terminating some leases. General unsecured creditors reportedly will receive $1.25 million.
Any Maryland business owner should be aware that a business that is struggling with debts often can file for bankruptcy under the provisions of Chapter 7 or Chapter 11 of the federal bankruptcy code. Because the laws pertaining to bankruptcy can be complicated and difficult to understand, choosing an experienced Hyattsville Maryland bankruptcy court lawyer to work with is generally a wise decision.
Source: Reuters, “U.S. court approves Sbarro’s bankruptcy exit plan,” Nick Brown and Matthew Lewis, May 19, 2014