Pizza chain Sbarro files for bankruptcy protection
By Jonathan Stempel
NEW YORK (Reuters) - Pizza chain Sbarro LLC has filed for bankruptcy protection for the second time in three years after struggling with too much debt and fewer customers in malls that house many of its restaurants.
Lenders would take control of the Melville, New York-based company under a "pre-packaged" Chapter 11 reorganization, which Sbarro on Monday said could allow it to made a "quick exit" from bankruptcy before May 7.
Sbarro expects to cut its debt load by more than 80 percent, and said nearly all its lenders support its restructuring, which requires court approval. The company will invite other buyers to submit better offers.
Founded in 1956, Sbarro had tried to boost sales by revamping its recipes to entice diners who increasingly favor "fast casual" chains such as Chipotle and Panera Bread.
But an "unprecedented decline in mall traffic" and an "unsustainable" balance sheet necessitated a restructuring, including the closure of hundreds of restaurants, Chief Financial Officer Carolyn Spatafora said in a court filing.
"Sbarro has been stuck with an outdated business model," said Michael Whiteman, a restaurant consultant and president of Baum & Whiteman LLC in Brooklyn, New York. "Its biggest shortcoming is that it sells food that has been sitting out for a while, and more people want food made to order."
The company said it recently closed more than 180 money-losing restaurants, and expects to shed about 50 more locations.
It said it now has 799 restaurants in over 40 countries, employing more than 2,700 people. Sbarro said the bankruptcy does not affect the 582 restaurants owned by franchisees. Continued...