A pizza restaurant chain, which many New Jersey residents know from area malls, has recently entered Chapter 11 proceedings. The Chapter 11 commercial bankruptcy represents the second time that the pizza restaurant has initiated the bankruptcy process in the last three years. According to one restaurant consultant, the biggest problem faced by the chain is that it is operating under an out-of-date business model.
The chief financial officer for Sbarro cites another explanation for declining sales. According to him, the company is suffering because fewer people are shopping at malls. He also says that, with the decline in sales, the balance sheet has been unsustainable. As a result, the company was forced to close over 180 unprofitable restaurants. Nevertheless, it still operates 799 locations throughout the world.
During the current reorganization proceedings, the company plans to close another 150 restaurants. However, it says that bankruptcy will not affect the continued operations of its 528 franchise restaurants. Indeed, the reorganization process may play a key role in their continued viability, especially if the company is able to use bankruptcy to successfully get back on firm financial ground again.
Sbarro’s chief executive stated that his company is committed to the bankruptcy process. He says that senior management is focused on the success and future growth of the business, and the Chapter 11 filing is an important part of achieving those goals. Indeed, the company plans to reemerge from bankruptcy in May. Hopefully, by that time, it will be a stronger and more viable organization, and numerous jobs and restaurant locations will have been saved. New Jersey businesses — both large and small — can achieve similar results to weather these difficult economic times.
Source: The New York Times, Struggling Pizza Chain Sbarro Seeks Bankruptcy Protection Again, No author, March 10, 2014
