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Pizza chain seeks bankruptcy again

National pizza chain Sbarro has announced that they are filing for bankruptcy protection for the second time in three years. The company says that they continue to struggle with overwhelming debt and not enough revenue from the dwindling number of customers that purchase their food.

The plan for the bankruptcy seems to be pretty well in place already. Lenders will take control of the company under the prepackaged deal that has been announced under Chapter 11 of U.S. Bankruptcy Code. The plan is to move quickly to cut the company's debt by about 80 percent and exit the bankruptcy as soon as possible. In order to restructure in a bankruptcy, companies must get approval from each of their lenders who will be impacted by the move. In this case nearly all of Sbarro's lenders have agreed to the plan, most likely because it represents their best possible scenario for being paid back or at least recouping costs.

Some blame the company’s business model for its financial struggles, saying that customers have now come to expect fresh, made-to-order quick serve food, rather than food that has been sitting out for minutes or hours before they purchase it. Sbarro typically operates in more of a cafeteria style, with customers choosing from an array of hot and cold food that has already been set out. The previous bankruptcy filing for the company occurred in 2011 and the reorganization process lasted less than a year, although it was apparently ineffective in resolving the financial problems of the company.

Source: New York Times, “Struggling Pizza Chain Sbarro Seeks Bankruptcy Protection Again,” March 10, 2014.

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