Several restaurant chains have filed for Chapter 11 bankruptcy protection recently including Quiznos, a restaurant chain that specializes in toasted subs. Quiznos’ bankruptcy protection filing comes less than one week after Sbarro, another restaurant chain, did the same. Quiznos once had more than 5,000 independently-owned stores, but the number of stores has dwindled to 2,100. Because all but seven of the stores are independently-owned and operated franchises, no store closings are expected during the bankruptcy process. According to Quiznos’ website, there are three stores located in New Hampshire.
Business bankruptcy, which is often governed by Chapter 11 of the Bankruptcy Code, is not just for businesses that have failed and need to shut their doors and liquidate assets. It can also be a very useful tool for businesses that have an unmanageable amount of business debt and not enough cash flow.
Chapter 11 was partly designed to give struggling businesses an opportunity to reduce debt and reorganize in order to get a fresh start. The goal is for the company to emerge from the Chapter 11 process in a better position to compete and become profitable in the future.
According to a statement released by the company, Quiznos will cut more than $400 million dollars of debt if the bankruptcy plan is successful. The company is also seeking court approval of a $15 million dollar loan to cover operating expenses during the bankruptcy. If the business reorganization process is successful for these restaurants, they may emerge more streamlined and stronger than ever, and hopefully well-equipped to compete in a very competitive market.
Source: WMUR.com, “Quiznos files for bankruptcy: Executives agree to restructuring plan to cut $400M in debt,” Katie Lobosco, March 14, 2014