Another one bites the dust.
Bennigan's, Steak & Ale Close, File for Bankruptcy Protection - WSJ.com
[FONT=times new roman,times,arial]July 29, 2008 12:47 p.m. EDT [/FONT]
Bennigan's, Steak & Ale Close,
File for Bankruptcy Protection
[FONT=times new roman,times,serif][FONT=times new roman,times,serif]By JEFFREY MCCRACKEN and JANET ADAMY
July 29, 2008 12:47 p.m.[/FONT]
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National restaurant chains Bennigan's and Steak & Ale have closed their doors and filed for Chapter 7 bankruptcy protection, shuttering more than 300 locations and letting go of thousands of employees.
It is one of the country's largest restaurant bankruptcies and eliminates two sit-down chains that have been part of the casual-dining landscape for decades. The chains will liquidate and aren't likely to re-open.
Late Monday, managers at Bennigan's and Steak & Ale were told not to open restaurants the next day, according to two people familiar with the matter. Employees were told there wouldn't be enough money to pay them for the rest of the week, these people said.
The Bennigan's Grill and Tavern in Arvada, Colo.
Leah Templeton, a spokeswoman for the company, said in an email that the companies that filed bankruptcy cases are popularly known as Steak & Ale, Bennigan's and Tavern restaurants. She said that not all stores using these trade names have filed bankruptcy, and that stores operated by franchisees aren't named as debtors in these filings. She said the filing doesn't include the company's Ponderosa and Bonanza restaurants, which operate under Metromedia Steakhouses Company L.P.
The pub-themed Bennigan's had 310 restaurants in 32 states. It was founded in 1976. It is heavily concentrated in states like Texas, Illinois and Michigan. It posted U.S. sales of $542 million in 2007, according to Technomic Inc., a food-industry research and consulting firm.
The restaurant chains are owned and managed by Plano-based Metromedia Restaurant Group, a unit of billionaire John Kluge's Metromedia empire.
Metromedia also manages Bonanza, Ponderosa and 29 Degrees and Southlake Tavern. The latter two also are closing. 29 Degrees opened in March 2007.
Metromedia Restaurant Group earlier this year violated several terms of a lending agreement with GE Capital Solutions. 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.
The filing is the most extreme sign yet of how midpriced sit-down restaurants are undergoing one of their worst periods in decades. High ingredient and labor costs are eating into profits, and several years of rapid expansion by bar and grill chains has left a glut of locations in the market. Pressures on consumer spending like high gasoline prices and dwindling home values have prompted consumers to eat out less often or switch to cheaper fast-food meals.
Earlier this year, the parent companies of the Bakers Square, Village Inn and Old Country Buffet filed for Chapter 11 bankruptcy protection, citing falling sales and rising food costs. A host of other chains -- from Outback Steakhouse to Ruby Tuesday -- are also struggling.
Metromedia has about 750 company and franchised restaurant sites in more than 40 states and outside the U.S., according to its Web site. Its annual U.S. sales are estimated at $1 billion.
Mr. Kluge, a 93-year-old German immigrant with an estimated worth of $9.5 billion, originally bought Bonanza and Ponderosa in the 1980s, later adding the Bennigan's Grill & Tavern and Steak & Ale chains into one umbrella company. Mr. Kluge is chairman, CEO and president of holding company Metromedia Co.
Metromedia's steak houses -- Ponderosa, Bonanza and Steak & Ale -- are concentrated in states including Ohio, Indiana and Pennsylvania. It posted 2007 U.S. sales of $388 million from 370 sites.
