San Antonio-based buffet restaurant chains cite COVID for closures and bankruptcy filings

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This appears to be the end of the line for some once popular restaurant chains including Old Country Buffet, HomeTown Buffet, and Ryan’s Buffet.

The chain operators, based in San Antonio, have closed restaurants amid the coronavirus pandemic and filed 15 bankruptcy petitions this week.

“The pandemic has really taken hold of this business because it has a lot of other businesses in many different industries, but particularly in the restaurant business,” said Jason Brookner, a bankrupt companies lawyer, during of a hearing Thursday in Dallas.

Restaurants could not overcome shelter-in-place orders and restrictions that limited take-out and delivery operations. The Centers for Disease Control and Prevention had advised restaurants not to offer self-service food and drink, such as buffets.

Fresh Acquisitions LLC, owner of Furr’s Fresh Buffet, and Buffets LLC, parent of Old Country Buffet, HomeTown Buffet, Ryan’s, Fire Mountain and Tahoe Joe’s Famous Steakhouse, have requested the Chapter 11 reorganization for themselves and the chains.

This is the fourth trip to bankruptcy for some companies since 2008, the last time in 2016 in San Antonio.

Before the pandemic, companies operated 90 sites in 27 states. However, none of the restaurants were in San Antonio. Before the 2016 bankruptcies, there were more than 300 restaurants in 35 states.

Brookner said the restaurants open to customers “have now been reduced to six” – Tahoe Joe’s locations, all in California.

“There is hope and expectation that as Chapter 11 comes out there will be an opportunity to grow brands to some extent and profit from the post-COVID recovery,” he said.

U.S. bankruptcy judge Stacey Jernigan approved an application to dismiss 57 of 71 restaurant leases, eliminating about $ 1 million in monthly expenses. The keys had already been handed over to the owners, Brookner said.

He said the plan was to sell all six Tahoe Joe locations in a process overseen by the bankruptcy court. The other eight locations operated as Furr’s Fresh Buffet restaurants, which Brookner said the companies also intended to sell.

“We are ready for a sales process,” he told the judge during the hearing, which took place remotely.

San Antonio-based VitaNova Brands, which managed the chains and provided back-office services, is expected to make the initial offer – known in bankruptcy jargon as “horse stalking.”

The amount of VitaNova’s offer will be based on the funding it has provided to debtors, plus the assumption of liabilities. VitaNova loaned debtors $ 500,000 last week, and the judge approved it by providing $ 1 million in additional financing. VitaNova could ultimately provide up to $ 2 million more.

An auction will be conducted to generate the highest possible return for creditors, Brookner said. Funding requires approval of a sale within 75 days of filing for bankruptcy, according to a court document.

In a statement, VitaNova CEO and co-founder Jason Kemp looked optimistic about the future of Tahoe Joe’s and Furr’s.

“We look forward to emerging from bankruptcy as a stronger operator with a focus on the Tahoe Joe’s and Furr’s AYCE Marketplace banners,” said Kemp. “These great brands serving great food will create a platform for future growth.” ACYE stands for All You Can Eat.

Tahoe Joe’s six restaurants generated about $ 21 million in annual revenue before the pandemic, not enough to support all operations, according to a court record.

VitaNova operates other chains, including Zio’s Italian Kitchen and Sushi Zushi.

Buffet-style restaurants “suffered the brunt of the lost sales during the pandemic” among their peers, Kemp said.

Fresh Acquisitions and another entity defaulted in February on a credit agreement with a secured lender that owed about $ 13.5 million. But the lender agreed not to take immediate action. Unsecured creditors owe more than $ 10 million, according to documents.

Buffets received approval last year for a $ 10 million Paycheck Protection Program loan from the United States Small Business Administration. Fresh Acquisitions has received approval for a PPP loan of nearly $ 3 million. The money was intended to cover salary costs. If the money is used to pay the employees, the loans can be canceled.

The bankrupt businesses employ nearly 800 people, although many have been out of work with the restaurants closed. Tahoe Joe’s sites have 440 employees.

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