The pizza restaurant chain Sbarro has filed for bankruptcy protection a second time after struggling with way too much debt and fewer customers in malls, where many of its restaurants are located. Sbarro plans on filing a Chapter 11 reorganization, which will allow it to cut its debt load by more than 80 percent. Lenders have supported the restructuring, which will require court approval.
Founded in 1956 by Gennaro and Carmela Sbarro, a married couple who immigrated from Naples, Italy, Sbarro quickly expanded in the New York City area. The original restaurant format featured an open kitchen which allowed customers to serve themselves.
The restaurant attributes its financial problems to an “unprecedented decline in mall traffic,” an “unsustainable” balance sheet and the closure of hundreds of its restaurants. However, experts in the restaurant industry attribute Sbarro’s loss in earnings to its outdated business model. The restaurant is trying to sell food that has been sitting out for a while. Today, more people want food that is made to order.
The company said it recently closed more than 180 money-losing restaurants and expected to close about 50 more. It now has 799 restaurants in more than 40 countries, employing about 2,700 people. Sbarro said the bankruptcy did not affect the 582 restaurants owned by franchisees.
Sbarro and 33 affiliates filed for protection from creditors with the federal bankruptcy court in Manhattan. The company reported assets of $175.4 million and liabilities of $165.2 million. It plans to shed $140 million of secured debt in the reorganization. Sbarro previously filed for bankruptcy protection in April 2011, and emerged from Chapter 11 the following November.
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