Restaurants suffer during economic downturns. As many customers have experienced a decline in disposable income, people who used to go out to eat a few times per week have scaled back. They venture to the grocery store more often to purchase food to prepare meals at home. Customers are inclined to purchase less expensive items on the menu or wine list.
As a result, many restaurants have had to resort to increased advertising, offering menu specials, and expanding menu items. With a decline in sales, many restaurants have closed their doors or filed for bankruptcy. Full-service chains have an advantage in terms of advertising and value menu items. However, they are not immune to the effects of lost profits. The saturation of the market with fast food chains continues to be a factor that exacerbates a decline in profits for many chains.
As a result of a decline in revenue, many restaurant owners are faced with an inability to meet payroll obligations or timely make rent/lease payments. Quite frequently, revenue issues are usually coupled with a dispute with the franchisor over franchise fees or the terms of the franchise agreement.
In an economic downturn, Chapter 11 bankruptcy can be a critical tool for restaurant owners to restructure existing indebtedness. It can also provide a mechanism for an orderly sale of assets or wind down of operations.
DelCotto Law Group has experience in restaurant restructuring, both in out-of-court restructurings and Chapter 11 bankruptcy proceedings. We can assist a restaurant owner in analyzing and addressing key restructuring issues including, but not limited to:
- Lease Assumption, Rejection or Assignment
- True Lease/Finance Lease Analysis
- Gift Cards/Customer Programs
- PACA Claims
- Critical vendors
- Administrative Claims
- Tax Claims
- Franchise Agreements/Disputes with Franchisor
- Asset Sales