Sbarro, LLC, a pizza chain best known as a staple in shopping mall food courts, filed for Chapter 11 bankruptcy on Monday. It’s not the first time the chain has faced financial difficulties in a changing landscape where customers looking for fast food have higher expectations and more choices than ever.Flickr | http://www.flickr.com/photos/digiart2001/2173382640/sizes/o/in/photolist-4j49Wu-4jfNi6-4p49ww-
In a court filing statement, the Chief Financial Officer, Carolyn Spatafora, cited an “unprecedented decline in mall traffic” as part of the cause for the bankruptcy. The company recently closed around 180 stores and announced that another 50 locations in North America were slated for closure as part of the reorganization plan under the most recent bankruptcy filing.
Sbarro, based in Melville, NY, previously filed for bankruptcy protection in 2011, from which it emerged in about seven months after reorganizing and slashing debt. This time around, the company is reported to have assets of $175.4 million and liabilities of $165.2 million, and said it has plans to cut about $140 million in secured debt during the bankruptcy process. The long-standing pizza chain also announced it will seek bids from other companies to submit purchase offers for the assets it is shedding.
According to court records, Sbarro officials said the company plans to cut its debt burden by 80 percent, and that all of their lenders and other partners are supportive of the measures put forth. The company also announced that it plans to reemerge from the bankruptcy restructuring plan quickly and make its way out of Chapter 11 status by May 7 of this year.
Company officials said the plan will help the company develop a long-term strategy to stay in business. “The board and senior management team are committed to ensuring Sbarro’s future growth and success and today’s filing is a necessary step,” Chief Executive David Karam said in a press release.
Karam, formerly of the hamburger chain, Wendy’s, came on board with Sbarro last year in March and attempted to plot a new direction for the company. The menu was revamped in an effort to compete with popular newer chains, such as Panera Bread, Chipotle and Five Guys Burgers, which patrons perceive as having better quality or upscale flavors with a casual atmosphere. However, the changes haven’t made enough of an impact since fewer people are regularly going into shopping malls, and instead, are opting to eat at stand-alone restaurants where they can get in and out quickly and have food made to order.
Sbarro has humble beginnings in Brooklyn, NY, where a classic tale of the American dream played out. Gennaro and Carmela Sbarro, an immigrant couple from Naples, Italy, opened their first restaurant in Brooklyn back in 1956. The couple expanded the business around the New York City area, and in 1967, launched the self-serve, open kitchen restaurant format that is familiar to pizza-eating mall patrons in recent times.
Currently, Sbarro said it has 799 restaurants in over 40 countries, and plans to close 155 of around 400 of its North American locations. Nearly 600 additional Sbarro restaurants are still owned by franchisees, not the parent company, and those stores will not be affected by the bankruptcy proceedings.