Corner Bakery declares individual bankruptcy
Corner Bakery filed for Chapter 11 credit card debt security to fend off a creditor. / Photograph: Shutterstock.
Corner Bakery, the quick-informal bakery-café chain the moment tagged as a likely rival to Panera Bread but which has struggled as individuals stopped coming into the place of work, sought Chapter 11 individual bankruptcy security this 7 days as it seeks to fend off an hard work by creditors to get command of the enterprise.
The chain, which completed 2021 with 161 places but appears to have far fewer now, has $33.8 million in secured credit card debt, a legacy of personal debt taken out in 2017 that investment organization Pandya Group inherited when it purchased Corner Bakery from Roark Cash in 2020.
SSCP Restaurant Investors obtained that personal debt and made moves to acquire the chain in excess of, setting up a sale system this 7 days and prompting the personal bankruptcy submitting, according to court docket paperwork. Corner Bakery had been in talks to pay out off the financial debt prior to SSCP acquired the rights to that credit card debt on the secondary market place. The quickly-relaxed chain disputes the amount it owes, saying it owes involving $20 million and $24 million.
Still Corner Bakery has struggled for decades with weakening product sales and shifts in purchaser actions. Unit volumes were slipping in advance of the pandemic, in accordance to court files, which led Roark to employ the service of restructuring advisers and investigate strategic alternate options.
The pandemic hit in March 2020 and a person month later it was sold to Pandya Restaurant Advancement Models, a subsidiary of Rohan Group of Corporations, the Pizza Hut operator that also bought the quick-informal chain Boston Market place all around that very same time.
Nevertheless that era was hard for city rapid-informal chains these as Corner Bakery, which has historically relied on office personnel who stopped by for breakfast or took a crack throughout lunch. The chain also experienced a wholesome business catering office functions.
Much of that stopped during the pandemic, and workers have been sluggish to return to places of work because then.
The price surroundings also did Corner Bakery several favors, with growing costs for foodstuff and wages. In addition, the enterprise said that landlords “have been significantly impatient” in the publish-COVID atmosphere.
Corner Bakery says it has a lot of lucrative destinations, but other people “are underperforming and burdened the organization.”
Corner Bakery defaulted on its loans final year.
It is unsure how many destinations the model has correct now. But in accordance to Technomic, the chain experienced 161 destinations at the end of 2021, down from 196 five a long time before. However that 2021 quantity incorporated 50 franchisee-owned destinations. Court paperwork explained there are now just 14 franchisee locations.
Meanwhile, opportunistic buyers have in the latest many years taken gain of secondary credit score markets to acquire bets on having difficulties ideas, obtaining credit card debt for a fraction of what is owed and then using their standing as a secured financial institution to take in excess of the business. Secured creditors whose credit card debt goes unpaid can foreclose on a company’s assets and are the 1st to be compensated in a bankruptcy process.
SSCP obtained that credit card debt earlier this calendar year and this thirty day period declared the debt in default. Corner Bakery submitted for personal bankruptcy on Wednesday, the day in advance of a scheduled sale of the enterprise by SSCP.
Corner Bakery explained that a individual bankruptcy filing would help the corporation to seek out new cash and preserve the point out of the small business. The corporation also stated it is “in the process of investigating” SSCP’s steps and the quantities owed to the creditor.
Still, the bankruptcy submitting of Corner Bakery is indicative of a difficult ecosystem for restaurant companies coming out of the pandemic. With federal government assistance now long gone and profits down pursuing a demanding 2022, many firms that did not produce robust enough sales and earnings coming out of that period may perhaps uncover on their own on the outs with loan companies and landlords.
Toms King, a large Burger King franchisee, sought personal debt security before this year. The travel-through burger chain Checkers is seeking to restructure its personal debt and Crimson Lobster is trying to find rent concessions. The brick oven pizza chain Bertucci’s declared individual bankruptcy earlier this 12 months.
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