Benningan's, the casual dining chain where I had many bad dates, and Steak and Ale, a chain I never visited, have filed for Chapter 7 bankruptcy protection, underscoring how cash-strapped diners are not finding deals like unlimited breadsticks all that tempting.The two chains, which are owned by billionaire John Kluge, have been in financial hot water for months, according to The Wall Street Journal. The paper reports that the chains were so broke that they did not have enough money to pay their employees for the rest of the week.
"Metromedia Restaurant Group (Kluge's company) earlier this year violated several terms of a lending agreement with GE Capital Solutions," the Journal reports. "It had been in negotiations with lenders for months to stave off the filing, while closing some stores and looking for a buyer, said two people involved in the matter."
Rising labor costs and soaring prices for food are killing casual dining chains. Cheesecake Factory Inc. (NASDAQ: CAKE) recently reported disappointing second quarter results, which featured the biggest drop in same store sales in the dining chain's history. Last year, activist investor Nelson Peltz acquired a 14% interest in the company. Brinker International Inc. (NYSE: EAT), owner of Chilli's Bar and Grill, and IHOP parent DineEquity Inc. (NYSE: DIN) are both down by double digits this year.
There is no hope for a turnaround in these companies anytime soon. Much like diners in these establishments, investors in these stocks are in for a world of indigestion.
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Reader Comments (Page 1 of 1)
7-29-2008 @ 7:20PM
Austin Chu said...
I blogged here before about retailers filing for bankruptcy. Since I work for a company that manages and tracks gift cards, I'm interested in the gift card portion of retailers when they file for bk. I've been following the Bennigan's bk on savvywallet.com. My advice? Spend those gift cards. Only corporate owned bennigans have shutdown, the franchised ones are still open. Not sure if they will be accepting corporate gift cards, but at least Ponderosa steakhouse and Bonanza will still be accepting them because they were once owned by Metromedia.
7-30-2008 @ 8:00AM
al coholic said...
I know that eating out regularly is a waste of money but I wonder if it is just me or is the spread between what it costs to make meals at home vs eating out larger these days?
8-01-2008 @ 7:15PM
T-Flan said...
"Benningan's"??
8-16-2008 @ 11:02AM
Jose said...
I was shocked to pass the two Bennigan's nearest my home and job closed up. I had not been there for a while because of illness in the family out-of-state. They were well organized, provided good service and served quality meals.
It is a pity for this nation that our banks cannot be less greedy and try to help our businesses in these very sad times of our history. As an individual depositor, I cannot tell how many times the banks have defrauded me as an individual take advantage of mistakes and practically killing whole paychecks. They have enough money out there to assist businesses to stay afloat.
From coast to coast these restaurant chains provide jobs mostly for students who are working their way through college, tech schools or a part-time job for high school students and working parents.
I hope these greedy coroporations will find out just what will become of them once this country starts falling apart. The Soviet Union collapsed overnight; the USA can collapse, too, if its people don't awaken.