The recession diet claimed another victim today. That's when the Wall Street Journal reports Mrs. Fields Famous Brands LLC -- which sells those formerly wonderful chocolate chip cookies and TCBY yogurt from 1,200 U.S. franchises -- bit the dust.

Mrs. Fields is cooking up a messy financial stew. Its pre-packaged bankruptcy will give bondholders the majority of its new common stock. In particular, the Journal reports that deal lets "note holders exchange their $195.7 million in notes for $90 million in cash, $50 million in new senior secured notes and 87.5% of the company's new common stock. The note holders are expected to recover 86.5% on their claims."

Mrs. Fields has been losing money and it posted a $10.7 million loss in the quarter ending June 2008-- almost eight times more than the $1.4 million it lost in the same quarter of 2007. When you're trying to pay for gasoline and keep your family fed, chocolate chip cookies and frozen yogurt are luxuries that many people can do without. The recent credit problems of Pizzeria Uno and the bankruptcy of Bennigan's and Steak & Ale suggest that many more retailers will bite the dust before this economic crunch is out.

That's the way the cookie crumbles.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

Bloomberg News reports that Uno Restaurant Holdings -- which operates Pizzeria Uno -- is the latest in a string of restaurants that can't stay afloat as consumers reverse splurge on their recession diets. It follows Bennigan's and Steak & Ale among those national restaurant chains that couldn't feed banks' hunger for loan repayment.

Bloomberg reports that Uno won't pay the interest due on its debt as scheduled, and S&P downgraded it as a result. It wrote that Uno "will delay paying interest, making use of a 30-day grace period allowed in the terms of its $142 million of notes due 2011, according to a statement from Standard & Poor's. S&P cut Uno by two levels to CC and said it would downgrade again to its lowest rating of D if the West Roxbury, Massachusetts-based company fails to pay on Aug. 15."

In addition to Bennigan's, Bloomberg reported that a big Pizza Hut chain filed for bankruptcy this month -- "Ohio-based Midland Food Services LLC, the operator of 92 Pizza Hut restaurants." I am a big fan of Uno's pizza and its nachos, but I guess that Uno has borrowed more money than its declining sales and rising food and labor costs permit it to repay. It remains to be seen whether it can renegotiate terms with its creditors.

If not, it will probably join its brethren in taking the hit for a lousy economy that's likely to get worse.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.

The New York Times reports that Bennigan's -- an "Irish-themed bar and grill" -- closed its 200 U.S. sites, throwing hundreds out of work. When you combine gasoline prices over $4 a gallon, higher food prices, and declining incomes, people change their economic behavior. That is particularly true when people can no longer use the equity in their homes to cover the gap between what they want and what they can afford.

In April, I posted on the recession diet, which is the way that consumers are coping with the squeeze on their budgets. They have staycations, they don't drive to or shop at the mall, they eat at home, and they buy more pasta and consume fewer vegetables and steaks.

It's great news that gasoline prices have come down recently -- in some cases as much as 20 cents a gallon. But it's not clear whether that will be enough. In any case, the Times provides a nice list of those restaurants and retailers that have filed for bankruptcy in the wake of the recession diet:

• Bennigan's
• Steak & Ale
• Mervyn's, mid-tier department store chain
• Steve & Barry's, a fashion retailer
• Linens 'n Things
• Sharper Image

I think there will be more such bankruptcies and I plan to look at publicly traded companies in these industries to see which are the likeliest candidates. If you have ideas you'd like to analyze, please post your thoughts below.

Peter Cohan is President of Peter S. Cohan & Associates. He also teaches management at Babson College and edits The Cohan Letter. He has no financial interest in the securities mentioned.