According to The Street, The fast-casual restaurant segment has faced significant challenges in the years following the Covid-19 pandemic, which forced many dining establishments to close their doors temporarily or permanently. While some restaurants successfully pivoted to delivery, takeout, and drive-thru models, the financial repercussions of shutdowns left many chains in dire straits, leading to numerous Chapter 11 bankruptcy filings and, in some cases, Chapter 7 liquidations.
Major Bankruptcies in the Industry
One of the most notable chains to succumb to financial pressure is Red Lobster, which filed for Chapter 11 bankruptcy on May 19, resulting in the permanent closure of 93 locations. The seafood restaurant’s struggles highlight the ongoing difficulties faced by the fast-casual dining sector.
Another casualty, Rubio’s Coastal Grill, filed for Chapter 11 on June 5, citing California’s AB 1228 as a contributing factor. This legislation increased the minimum wage for fast-food workers in chains with over 60 locations in the state from $16 to $20 per hour. Rubio’s closed 48 out of its 134 locations across California, Arizona, and Nevada.
Financial Distress in Italian Restaurant Chains
The Italian restaurant segment has a longstanding history of financial challenges. In April 2020, FoodFirst Global, the parent company of Brio Tuscan Grill and Bravo Cucina Italiana, filed for Chapter 11 due to financial struggles exacerbated by the pandemic. Earl Enterprises subsequently acquired the Italian restaurants two months after the filing.
Johnny Carino’s Italian restaurant chain also faced significant financial difficulties, filing for Chapter 11 protection twice: first in 2014 and again in July 2016. Longtime mall staple Sbarro, with over 700 locations worldwide, filed for bankruptcy in 2014, struggling with high food, labor, and lease costs after a previous filing in 2011.
Buca di Beppo Enters Chapter 11
The latest in the wave of bankruptcy filings is Buca di Beppo, which filed for Chapter 11 protection on August 4, seeking to reorganize with the backing of its lenders. The Orlando, Florida-based chain, owned by Buca Investments and nine affiliates, reported liabilities between $10 million and $50 million in its filings with the U.S. Bankruptcy Court for the Northern District of Texas.
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Court documents indicate that Buca di Beppo has been affected by a “significant drop in sales, rising food and labor costs, continued staffing challenges, and changes to customers’ preferences.” Recently, the chain closed 13 underperforming locations, including restaurants in Sacramento and Salt Lake City, and currently operates 44 core locations across 14 states, along with two international locations.
Looking Ahead: A Strategic Move for Buca di Beppo
In a statement following the bankruptcy filing, company president Rich Saultz described the move as a strategic step toward a stronger future for Buca di Beppo. “While the restaurant industry has faced significant challenges, this move is the best next step for our brand. By restructuring with the continued support of our lenders, we are paving the way toward a reinvigorated future,” he stated.
Founded in Minneapolis in 1993, Buca di Beppo grew to as many as 95 locations by 2013 before beginning to close restaurants. It was acquired by Robert Earl’s Planet Hollywood International in 2008 and is now owned by Earl Enterprises.
Conclusion
As the fast-casual restaurant segment navigates the aftermath of the pandemic, it faces ongoing challenges that threaten its viability. With significant bankruptcies highlighting the struggles within the industry, the future remains uncertain for many established chains.
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