According to The Street, Distressed businesses often seek Chapter 11 bankruptcy protection to reorganize their operations and financial conditions under court supervision, allowing them to continue functioning. However, when a company faces insurmountable challenges and can no longer operate, it may opt for Chapter 7 bankruptcy to liquidate and close its doors.
In some cases, businesses choose to liquidate their products and wind down operations without filing any bankruptcy petition. For example, retailers like LL Flooring and Big Lots have filed for Chapter 11 protection, closing several locations while continuing their operations.
Conversely, discount retail chain 99 Cents Only filed for Chapter 11 bankruptcy in April, liquidating its inventory and shuttering all its stores.
In a different scenario, Midwest Transport, a trucking and logistics company based in Robinson, Illinois, unexpectedly announced its shutdown in September without filing for bankruptcy. The company, which had a contract with the U.S. Postal Service to transport mail, informed its employees of the decision via phone on September 5. Employing over 480 drivers among its 650 workers, Midwest Transport has not made a public statement regarding its abrupt cessation of operations and has yet to file for bankruptcy protection. As of October 1, the company’s website remained operational, but its phone number was disconnected.
Another significant closure involves Yelloh, the frozen foods delivery company formerly known as Schwan’s, which plans to cease operations in November due to multiple insurmountable challenges, including economic and market headwinds and evolving consumer preferences. As of October 1, Yelloh had not filed for bankruptcy.
In a statement on September 23, CEO Bernardo Santana expressed, “It’s with heavy hearts that we made the difficult decision to cease operations of Yelloh. We are thankful to our many loyal customers and hardworking employees for their support.” Santana also acknowledged the efforts of employees and the dedication of customers, stating, “It has been our utmost pleasure and honor to serve our customers their favorite meals and frozen treats.”
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Founded in 1952 as Schwan’s, the Marshall, Minnesota-based company built the nation’s largest fleet of freezer trucks, delivering frozen meals, foods, treats, and ice cream to American homes. Over the last 20 years, Yelloh faced challenges from changing consumer lifestyles and competitive pressures. Staffing difficulties and significant food supply chain disruptions due to the Covid-19 pandemic in 2020 further exacerbated its struggles.
Yelloh board member Michael Ziebell noted, “Our concern is now for our employees as we all come to terms with the fact that this business, which served millions of families and provided a livelihood for thousands over the decades, has regrettably run its life cycle.” He added, “Digital shopping has replaced the personal, at-the-door customer interaction that was the hallmark of the company.”
The company plans to wind down operations over the next two months and has issued notices to employees under the Worker Adjustment and Retraining Notification Act. Its final delivery day is scheduled for November 8. Yelloh employs about 1,100 workers and delivers products through direct shipping and its yellow freezer trucks but has not indicated whether it will file for bankruptcy.
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