National restaurant chains Bennigan's and Steak & Ale have closed their doors and filed for Chapter 7 bankruptcy protection, shuttering more than 300 locations and letting go of thousands of employees.Independent Franchise Locations Remain Open
It is one of the country's largest restaurant bankruptcies and eliminates two sit-down chains that have been part of the casual-dining landscape for decades. The chains will liquidate and aren't likely to re-open.
Late Monday, managers at Bennigan's and Steak & Ale were told not to open restaurants the next day, according to two people familiar with the matter. Employees were told there wouldn't be enough money to pay ... Rest By Subscription
CBS News is reporting Bennigan's Restaurants Shut Down Nationwide.
Customers showing up for lunch at Bennigan's restaurants in Chicago and across the country found quite a surprise Tuesday morning, when all the corporate-owned locations had signs on display reading "closed for business."No Warning
As CBS 2's Joanie Lum reports, Bennigan's Grill and Tavern closed all of its corporate-owned locations nationwide after filing for bankruptcy. Independent franchises remain open for business as usual.
The corporate-owned locations comprise about half the entire chain.
Bennigan's spokeswoman Leah Templeton said Bennigan's and Steak & Ale restaurants � both of which are owned by Plano, Texas-based Metromedia Restaurant Group � have filed for bankruptcy, along with the holding company S&A Restaurant Corp.
Chapter 7 filing usually means a company has "major league debt," and it is unlikely that employees would get their last paycheck. He said someone could conceivably buy the assets and reopen the full Bennigan's chain, but that would only be after a long, drawn out court process.
The bankruptcy filing does not affect other two restaurant chains owned by Metromedia, Ponderosa and Bonanza Steakhouse, Templeton said in the statement.
Alphonso Prince, manager of the Bennigan's at 1250 Torrence Ave. in Calumet City, said he was notified of the shutdown at 12:10 a.m. from his area director, who was crying on the telephone. He said there was no forewarning about the shutdown.
"I'm angry," Prince said. "I'm hurt; I'm devastated."
"No blast of e-mails, nothing to say, 'Sorry, we just can't do it anymore,'" Prince continued, "just a phone call from my area director who doesn't know anything, because she just found out. She'd been with the company for 21 years."
Here's the deal. People cannot afford to eat out, Bennigan's could not raise prices (if it could have it would have) nor could it lower them to attract business because its debt load was too high. Simply put, Bennigan's was overleveraged with enormous debt and no way to pay it back.
Bankruptcy is going to be the final resting place for many restaurants, small corporations, and even entire malls in the same predicament. Yes, this is deflation at work.
The Shopping Center Economic Model Is History. Expect to see more stories like Macon Mall Faces Foreclosure.
Clearly the problem has spread to restaurants so expect to see more restaurants close without warning. Also, it's very important to remember that it was primarily service jobs that kept this economy running. The service sector is now at long last starting to crumble. Unemployment is poised to soar.
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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