Many people associate filing for Chapter 11 bankruptcy protection with negative connotations; however, it can be a great way for a company to survive the recession. Due to the economy and a lack of discretionary income, many New Jersey businesses may have taken a hit to their revenue and were forced to restructure to stay in business. Although it can be a difficult decision to make initially, it is possible to turn the situation around and emerge from Chapter 11 successfully.
Quiznos, the second largest sandwich chain in the United States, surfaced from a Chapter 11 in under four months. Many of the franchises sued the company, claiming that their ingredients were not competitively priced enough for them to make a profit. This helped to contribute to the $400 million in debt that the company had to overcome to stay in business.
In an attempt to eradicate some of the burdensome debt, the federal bankruptcy court approved their restructuring plan, which would result in the top three leaders making a trade. Through this trade, $445 million in debt would be exchanged for $200 million in newly acquired debt and 70 percent of Quiznos’ stock. In this restructure, more support will be provided to help the franchise owners to become more successful. This includes free product, decreases to ingredient costs and a rebate program.
According to Quiznos’ CEO, the emergence from Chapter 11 bankruptcy protection marks a fresh start. The company now has a stronger foundation from which to grow, and they can continue to serve their customers the high-quality sandwiches they love. New Jersey companies who are considering undergoing Chapter 11 can use it as a stepping stone to restructure their company to strive to be in a better financial situation for the future.
Source: Denver Business Journal, “Quiznos leaves bankruptcy protection with new financial structure“, Ed Sealover, July 1, 2014