Casual dining establishments have faced severe financial distress in the last year from the lingering effects of the Covid-19 pandemic, inflation, rising interest rates, and consumer changes in attitudes toward dining out.
The most prominent restaurant bankruptcy in 2024 was Red Lobster, which filed for Chapter 11 on May 19 and closed over 120 locations. The chain, which now operates 545 restaurants, exited bankruptcy on Sept. 16.
💸💰 Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💸
TGI Fridays Inc. was another significant casual restaurant chain that sought Chapter 11 bankruptcy protection on Nov. 2 seeking to reorganize its business, sell certain company assets, further reduce its restaurant footprint, and reject unfavorable leases and contracts.
Related: Health officials close Las Vegas Strip celebrity chef restaurant
The popular Italian restaurant chain Buca di Beppo filed for Chapter 11 bankruptcy protection on Aug. 4 to reorganize its business with the support of its lenders.
The debtors said the chain’s operations “have been impacted by a significant drop in sales, rising food and labor costs, continued staffing challenges, and changes to customers’ preferences,” according to court papers.
Buca di Beppo closed 13 underperforming locations in the week before it filed bankruptcy, which included restaurants in Sacramento and Salt Lake City. The debtor had 44 remaining locations in 14 states after the closings and before it conducted a bankruptcy sale.
Buca’s prepetition lender Main Street Capital Corp. purchased the restaurant chain for a $27 million credit bid.
Other casual restaurant chains, such as Shari’s Cafe & Pies, that face financial problems try to fight through the challenges to avoid filing for bankruptcy.
Shari’s Cafe & Pies has closed dozens of locations and faces landlord lawsuits.
Shutterstock
Shari’s Cafe & Pies faces wave of lawsuits
The struggling family-style dining chain is being sued by about 15 landlords of its closed locations in Oregon for nonpayment of rent before it shut down the units, KGW 8-TV reported on Dec. 31.
Related: Former bankrupt craft beer chain adds locations after closings
Shari’s reportedly owes about $4 million in overdue rent, late fees, and future rent obligations in its lease agreements, according to court papers.
The restaurant chain’s owner Gather Holdings Guarantee also faces a class action lawsuit filed by former employees in Oregon.
Shari’s sued for alleged WARN Act violation
The Oregon case, filed on Nov. 12 in the U.S. District Court for the District of Oregon, is related to alleged violations of the federal Worker Adjustment and Retraining Notification Act, which requires a 60-day notice before a plant closing or mass layoff.
More bankruptcy stories:
Another major trucking company files for Chapter 11 bankruptcyDisasters force key energy company to file Chapter 11 bankruptcyEmbattled home goods retailer plans to file Chapter 11 bankruptcy
The case alleges an employee was terminated without cause and the company violated the WARN Act by closing restaurants without giving a 60-day notice.
The Washington case was originally filed on June 14 in state court against Shari’s Management Corp. and moved to federal court. It is related to allegations of past job postings that violated salary and benefits information requirements, the Tacoma News Tribune reported.
Shari’s, which has faced financial distress for months, has not filed for bankruptcy. If the company were to file Chapter 11 reorganization or Chapter 7 liquidation, the bankruptcy court would likely issue an automatic stay of all legal actions against the debtor while the bankruptcy case proceeds.
Shari’s, which has faced financial difficulties since the Covid-19 pandemic, on Oct. 20 closed all of its remaining Oregon stores, which amounted to 42 locations at the beginning of 2024.
The restaurant chain closed all of its Oregon units as it faced mounting financial issues, such as eviction notices, unpaid bills, and back taxes.
Sam Borgese, CEO of Gather Holdings confirmed the closings in an email to the Oregon Lottery, KGW 8-TV reported.Â
Shari’s currently operates 12 locations spread through California, Idaho, and Washington, according to its website on Jan. 8.
