More small restaurant chains file for bankruptcy

The pandemic and its aftermath continue to victimize local chains, even those with strong reputations and national notoriety.

The latest is Melt Bar & Grilled, a grilled cheese concept founded in 2006 that operates four locations in Ohio. The company, which at one point was featured on both the Food Network and the Travel Channel, filed for Chapter 11 bankruptcy protection late last week.

The brand thrived for years and expanded aggressively but has struggled since the pandemic and wants to revert its unit count and debt load back to its pre-expansion era.

Also last week, the four-unit Kuma’s Corner, a popular burger and beer concept in the Chicago area, sought Chapter 11 debt protection, citing “general economic conditions,” particularly for restaurants, and “ongoing cashflow problems.”

They are the latest in a string of popular local concepts that have declared bankruptcy in recent months, proving that the pandemic and its inflation-fueled aftermath continue to create financial headaches for operators around the country.

For all the attention that large chains such as Red Lobster are getting for their financial woes, the pandemic is proving to be hardest on small and regional concepts that have historically had less room for error.

Several of these local brands have filed for bankruptcy in recent weeks, including the New York and New Jersey chain Sticky’s Finger Joint, the four-unit Oregon-based chain Boxer Ramen and the Tampa concept Brocato’s Sandwich Shop.

Some of these brands were popular for years, leading them to take on debt or other financing to meet demand, only to watch the pandemic wipe that out.

While many of these companies, including Melt, received government-backed financing to help them get through the pandemic, it’s high-cost aftermath has been brutal for operators. And those brands that can’t generate sales have struggled.

Melt first opened in Lakewood, Ohio, in 2006. It was featured on the Food Network program “Diners, Drive-ins and Dives” in 2009 and then the Travel Channel’s “Man vs. Food” in 2010. The concept has a menu featuring grilled cheese sandwiches, soups, salads and other items. The restaurant grew in popularity and the concept expanded.

The company continued to expand in the coming years and by 2018 and 2019 it operated 13 locations around Ohio and had annual sales of more than $18 million, according to court documents.

Melt had more expansion plans before the pandemic cut service to just takeout and delivery in 2020. While its restaurants reopened by the following August, sales did not return to prior levels. 

Melt received a Paycheck Protection Program loan and an Economic Injury Disaster Loan (EIDL). But the company said that its profits were too low to pay off debt, expenses and leases for each of its locations. The company has been closing restaurants steadily and is down to four units. It has also received extensions on its debt payments. 

Melt has now filed for bankruptcy to “shed debt accumulated during the company’s tremendous growth period from 2010 to 2019 and to return to debt levels sustainable by its current operations.”

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