Popular Craft Beer Restaurant Chain Seeks Chapter 11 Bankruptcy Protection

According to The Street, Craft-beer-themed restaurants have emerged as popular dining options, successfully pairing a wide variety of food items with an extensive selection of craft brews. Notable chains like BJ’s and Yard House have thrived in this space, building robust brands in the competitive restaurant industry.

Success Stories: BJ’s and Yard House

BJ’s Restaurants (BJRI) began its journey in 1978 as a Chicago deep-dish pizza joint in Southern California before shifting its focus to craft beer. With around 216 locations nationwide, BJ’s reported earnings on July 25 that exceeded analysts’ expectations. After a brief surge in stock price—hitting $38.87 on July 23—shares have settled at approximately $29.49 due to broader market pressures stemming from economic slowdown fears.

Similarly, Yard House, which launched in Southern California in 1996, boasts an impressive lineup of over 100 beers on tap. This chain currently operates about 88 locations across the U.S. and is owned by Darden Restaurants (DRI), further solidifying its presence in the craft beer dining sector.

Challenges for Smaller Chains

In contrast, smaller craft beer restaurant chains have faced considerable challenges in the post-pandemic landscape. Many have struggled with rising interest rates, increasing costs, inflation, and a significant decline in customer traffic, all exacerbated by the economic challenges consumers are grappling with.

One notable casualty is Melt Bar & Grilled, a regional chain based in Lakewood, Ohio. Founded in 2006 by Matt Fish, Melt specializes in gourmet grilled cheese sandwiches, craft beers, and signature drinks, including a vegan menu. On June 14, the restaurant filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Northern District of Ohio, citing financial difficulties due to rising food and labor costs and ongoing lawsuits from landlords. Once thriving with 14 locations in 2017, the chain has since downsized to six locations and satellite venues at Progressive Field and Case Western University.

Other Bankruptcies in the Craft Beer Sector

This year has seen additional craft beer restaurants file for Chapter 11. Zydeco Brew Works in Ybor City, Florida, filed for bankruptcy in January, closing its main brewery and restaurant in Tampa. Griffin Claw Brewing Co., with locations in Birmingham and Rochester Hills, Michigan, filed for Chapter 11 on July 26 amid a partnership dispute.

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In a significant development, World of Beer, a competitor of Yard House and BJ’s, filed for Chapter 11 bankruptcy on August 2, seeking to reorganize its operations, cancel leases, and alleviate debt. WOB Holdings and 11 affiliates filed their petition in the U.S. Bankruptcy Court for the Middle District of Florida, citing the impact of rising interest rates, lease obligations, inflation, and a slow recovery in dining habits post-pandemic. The company listed $10 million to $50 million in assets and liabilities, including over $25.6 million owed to Synovus Bank.

Founded in 2007, World of Beer expanded to 75 locations across 20 states by March 2016, even opening a franchise in Shanghai, China. However, the chain has since closed more than half of its locations, with only 34 remaining. Notably, 14 locations were shut down in the year leading up to its bankruptcy filing. In some cases, locations were rebranded rather than closed, as seen in May 2017 when three franchises in Virginia were transformed into Crafthouse by owner Evan Matz.

Conclusion

The craft beer restaurant segment illustrates a stark contrast between established chains like BJ’s and Yard House, which continue to thrive, and smaller chains grappling with financial distress in a challenging economic climate. As the industry evolves, these dynamics will significantly shape the future of dining experiences centered around craft beer.