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Sign of the times: Restaurants going bankrupt

Posted Jul 29 2008, 08:04 PM by Anthony Mirhaydari
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Confirming a trend we discussed last week, the corporate parent of Bennigan's and Steak & Ale restaurants filed for Chapter 7 bankruptcy protection as consumers continue to shy away from dining establishments in favor of home-cooked meals.

The closures affect only 0.5% of the U.S. bar-and-grill sector -- but they're a warning of tough times ahead for the $43 billion casual dining industry.

The rapid plunge into oblivion shocked patron Donna Wimes, who noted that "the food was good; they always seemed to generate a crowd." Others are reminiscing about Bennigan's deep-fried mozzarella sticks, while also noting that locations "looked full" anytime they passed by.

But of course, the financial health of a restaurant is determined by much more than customer traffic. In early June, the Wall Street Journal reported the company was in talks with its lenders, GE Capital Solutions, "in an effort to stave off a possible bankruptcy filing." Unfortunately, a toxic combination of rising food and labor costs, declining pricing power, and massive leverage continued, ultimately leading to the demise of the popular restaurants.

The restaurants are owned, through a subsidiary, by the Metromedia Restaurant Group, part of the Metromedia conglomerate founded by 93-year-old billionaire John Kluge. While independently owned franchise locations remain open -- representing roughly 50% of the total footprint -- some 300 company-owned locations across the country have been permanently shuttered. Any assets of value will be liquidated to settle outstanding debts. The fate of the brands, and the franchised locations, remains uncertain. 

(Disclosure: I don’t own shares in any of the companies mentioned)

Related reading:

Casual restaurants burned by inflation

Comments

 

This just goes to show that not everything that has bling-bling to it means it's GOLD.  We're heading back to the good old days where a family could have a nice quite supper around that dusty dining room table that nobody thought would be used again.  Hey!  maybe we'll finally start being a healthier nation - shoot, everybody else around the world sure is!(healthier I mean)

Kluge only cares about the billions of dollars that he has...he absolutley does not care about the 16,000 who losy thier jobs today without warning!! He could have gotten this company out of debt and reoganized!!

Bankruptcy for Bennigan's?  Oh, what a loss to American culture, a culture of copy and paste, copy and paste.  My God, what's next? Chili's? Home Despot? Crack in the Box? McNasty's? Maybe some quality local restaurants will takeover the lame Bennigan's locations.  May Benni's join the other quality places we've lost over the past few years: Monkey Wards, K-Mart (I mean Lazy Mart)

More to follow as people need to make smarter financial choices and many can do without eating out.

Bennigan's done what most Americans did with buying homes, they over extended them selves with credit.

Bennigan's wanted to expand and didn't think of the future cost of borrowing and the cost to operate.

This is just the tip of the iceberg, many companies are going to be in the same boat, Starbucks is 1 example that comes to mind.

Really?  Is this a question of American culture?  And when we speak of "everybody else around the world" being healthier I assume we are talking about the ones that aren't starving to death.  This is business, pure and simple.  You want American culture, well this is it.  We have a culture where anyone - large company or "mom and pop" - can have a successful business if they provide their customers with what they want.  I don't patronize a lot of companies, however I don't begrudge them their success.  I have been in customer service since I was old enough to work and it is a difficult business.  One should respect anyone who has managed to find their niche and survive - whether you use their services or not.

Bennigan's was fun in the 1980s-90s when casual restaurants were huge, but since then, who but the regulars knows the difference between Bennigans, TGI Fridays, Applebees, Ruby Tuesday, and the rest? I thought that Steak & Ale went out of biz years ago. It's still sad but take advantage of this and find your town's local homemade diner and forget about the chain stores.

I like Bennigans but honestly I only eat there when my favorite steakhouse has a huge wait time....I loved the buffalo wings....

I own a small "mom & pop" restaurant, and disagree with anyone who says the current economy isn't hurting business.  We can trace peaks and valleys in sales with the price of gas posted on the corner.  Our guests continue to rave about our food and service, but acknowledge that they aren't eating out as often. Business is Darwinian in nature, but the results aren't likely to be what the consumer wants.  A lot of mom & pops are leveraged as well, and we don't enjoy the economies of scale that the big chains do.  The weakest of the chains will fail, but so will a lot of us...

This should not come as a suprise to the passive americans. Americans are getting what they deserve for allowing the greedy oil companies, bankers and wall street assholes and politician assholes in washington, state and local to lay waste to americas ecomony. They (the americans) are too chicken shit to have american revolution 2. we took this land away from english tryany (taxation without representation) and now we reward it. we are being taxed / priced out of existance by people in government and industry that know american people don't give enough of a shit to do something about them. What are the american people waiting for? How many people need to go postal or start jumping off buildings after killing their family to save them from the pain and shame? More businesses will fail as people now have to choose between going to work or out for dinner and entertainment. Peoples disposable income has been usurped by the greed of the few. They laguhed at congress because they know that congress does not have the balls to chalenge them. They should be shot at halftime just to make a point that this behavior will not be tolorated and their companies nationalized. then lets see them laugh all the way to the bank. Am I angry? Damn straight I am and until all americans rise up together, we will continue to be at the mercy of these assholes!

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