Sbarro files for Chapter 11 a second time

Sbarro has done it again, filing for Chapter 11 reorganization twice in less than three years. The struggling pizza chain has already closed an estimated one-hundred and fifty-five of its four hundred locations in the United States but retains another 800 locations worldwide.

Sbarro Pizza

In April 2011, Sbarro made their first bankruptcy filing hoping to cut their costs, receive a capital infusion and emerge with a new vision for the company. They also hired a new CEO who was supposed to help them “revitalize the chain’s image by touting new recipes and ovens.”

Unfortunately, the strategy failed, and they have been forced to close even more stores in hopes of improving their balance sheets and profitability. This time they need to reduce their outstanding debts by more than 80 percent. According to Sbarro’s bankruptcy filings, they currently have between $100 million and $500 million in both assets and liabilities.

Sbarro has claimed the high cost of food, labor and occupancy have contributed to their financial distress, although company representatives did not immediately respond to requests for comments about Sbarro’s restructuring plans. Sbarro also faces tough competition, not only in the food industry, but also in the pizza business from other more profitable chains.

Sbarro comes from humble beginnings

 

Sbarro was founded in Brooklyn, New York, in 1956 by Gennaro and Carmela Sbarro. The couple emigrated from Italy with their three sons- Joseph, Mario, and Anthony. Their first location, Salumeria, opened in New York at 1701 65th Street and 17th Avenue in Brooklyn, New York, and was well-received by the community.

The first store was followed by others which were built throughout the city of New York in the 1960’s. The chain expanded to shopping malls by the 1970’s and was later purchased by MidOcean Partners, a private equity firm. The sale didn’t hurt the chain’s success, and they remained successful through 2007, when the economic downturn devastated the more than 200 U.S. Sbarro pizzerias.

What’s next for Sbarro?

 

One issue for Sbarro is the stagnation of the restaurant industry.  For instance, according to a report by The Salt, “In 2000, the average American ate out 215 times. Last year, that number shrank to 192, according to NPD data.”

The Salt also found that when diners do decide to eat out they tend to gravitate towards http://www.betterbankruptcy.com/bankruptcy-blog/wp-admin/post.php?post=4792&action=edit&message=1what is termed fast causal eateries, which offer more complete services than a fast food restaurant, but less than a full service restaurant. Experts claim that many customers want “new and fresh” dining experiences such as those offered at Chipotle, Five Guys and Panera. They are less excited about eating “preheated pizza slices” that might taste little better than what can be purchased in your local grocery story freezer section.

What does Sbarro need to do? Experts recommend it may be time to rethink what they are offering so they can stay “contempory.” It sounds like Sbarro is taking note. For instance last year in Ohio they tried a new restaurant style called Pizza Cucinova. Here, diners can order customized pies and craft beer.

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Beth

Beth L. is a content writer for Better Bankruptcy. Good content and information is one of many methods we utilize to bring you the answers you need.