Bennigan’s/Steak & Ale files for bankruptcy protection

NEW YORK – Restaurant chains Bennigan’s and Steak & Ale have filed for Chapter 7 bankruptcy protection and stores owned by its parent company will shut their doors.

The companies owned by privately held Metromedia Restaurant Group of Plano, Texas, filed for bankruptcy protection Tuesday in the Eastern District of Texas, less than two months after Metromedia said it was not preparing to do so. Metromedia Restaurant Group is a part of Metromedia Co., owned by billionaire John Kluge, that has interests in entertainment, radio stations and medical equipment.

In a Chapter 7 filing, a company seeks to liquidate its assets and shut down.

Locations owned by franchisees were not part of the bankruptcy filing and will not be shut down, said Larry Briski, president of the Bennigan’s Franchise Operator Association.

“They will be open today, tomorrow and months and years to come,” Briski said of the franchise locations.

The 138 domestic and international franchisee-owned restaurants are “open and fully operational,” Bennigan’s Franchising Co. LP and Steak & Ale Franchising Co. LP said in a statement.

Briski said there are about 150 company-owned Bennigan’s restaurants.

Meanwhile, employees at what appeared to be a company-owned Bennigan’s in Plano were greeted by a sign Tuesday on the front door reading “WE ARE CLOSED. THANK YOU.” Next door, a Steak & Ale sat empty in a deserted parking lot but there was no sign posted.

A waiter named Steve, who wouldn’t give his last name, said the staff got a phone call Tuesday morning telling them the restaurant was closing.

Neither Bennigan’s nor the Metromedia Restaurant Group returned calls for comment. A lawyer listed in the filing, J. Michael Sutherland of Carrington, Coleman, Sloman & Blumenthal LLP, did not return a call.

The filing lists 38 separate entities that it classified as “debtors” but does not include a list of locations that are shutting down.

All restaurants have been struggling as consumers cut back on discretionary spending to better deal with high gas prices, the weak housing market and inflation. The hardest hit have been casual dining chains and bar and grill restaurants, which charge higher prices than fast food and other quick-service chains.

Bar and grill restaurants have also suffered from intense competition. Morningstar analyst John Owens said several chains expanded quickly, making it more difficult for customers to differentiate between them and forcing many companies to cut prices to lure diners.

“Bennigan’s was the weakest of the major players,” Owens said.

Meanwhile, commodity costs have soared, forcing chains to either raise menu prices or see profits plunge.

Credit has also been tight, making it difficult for companies to restructure their debt.

In June, Metromedia Restaurants said it was formulating a proposal to present to its lenders to restructure its debt, but said it was not preparing to file for bankruptcy.

In the filing, the company indicated that it has up to 49 creditors and owes less than $50,000. It said it will have no funds left after administrative expenses are paid to repay its creditors.

Jeffry Davis, a bankruptcy attorney at Mintz Levin in San Diego who is not involved in the filing, said he was surprised the company didn’t file for Chapter 11 protection, which would have allowed it to reorganize and remain open, and instead filed to liquidate its assets.

“Typically, at that point, management sees no way to improve the business within a reasonable period of time to allow it to go forward,” he said. “To me it’s really indicative of the economy.”

The news appeared to be a shock to most of the company’s employees, but some may have had an inkling that the company was not doing well.

Steve, the Bennigan’s waiter in Plano, said he recently went from making $30 on a good lunch shift to only $10.

“Business has been slow,” said Steve, who said he relies on tips. “I went from making a lot of money on a shift to making very little.

*What was left out*

I live in Texas where the Headquarters of these two restaurants is located. There was some information left out of this article as it was described more in depth by local news coverage. Metromedia Co., owned by billionaire John Kluge, have been more interested in real estate recently and not been paying attention to their customers and what they want.

Anyone who has ever watched one episode of Hell’s Kitchen knows this is a HUGE mistake. What made these two restaurants stand out was what they offered and what got them them was listening to the customer. The sad thing especially Bennigan’s was that it was an Irish Pub/Bar/Grill.

Their problem was the got away from that in many ways, over the years and very recently they have changed their menu quite a bit as well as increased their prices, while stopping to listen to their customers. More and more people began to filter out the door, some never returning while others only ever so often. They lost a huge loyal base. Bennigan’s was a Heavy Hitter not the weakest link as the Corp would try to sway you to believe.

What got them was this as well as the other problems listed in the article. In this day in age what has just happened should send SHOCK WAVES to all businesses: Listen to your Customers or you too may find yourself in this mess sooner or later.

In this day and age it’s not a question of IF but When; when you lose sight of what’s important and stop listening to your businesses most important person: The Customer!


~ by Digory Kirke on July 31, 2008.

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