Businesses, like individuals, can benefit in appropriate cases from bankruptcy relief.
Just as with individuals, the reasons why a business might seek bankruptcy protection vary considerably from case to case.
In this post, we will take note of a recent bankruptcy filing by a national pizza chain that has been struggling financially in recent years.
The pizza company we are referring to is Sbarro. The company has made its second bankruptcy filing in less than three years. It filed for Chapter 11 bankruptcy today, after previously going through bankruptcy reorganization in 2011.
The company has many locations in malls across the country, such as at the Mayfair Mall in Wauwatosa.
But the company has seen a decline in traffic at many of its locations. This could be related to shifting consumer patterns, as fewer people visit bricks-and-mortar shopping centers and e-commerce continues to increase.
Sbarro said last month that it would close more than 150 stores. But the company is by no means calling it quits; even with the closure of 150 stores, it still expects to have a total of more than 800 restaurants in the U.S. and other countries.
Some of these stores are owned by the company. Others are owned by franchisees.
The bankruptcy filing is intended to enable Sbarro to work on a reorganization plan. It will have a different management team when it emerges from bankruptcy. And many holders of secured debt will instead receive ownership shares in the business.
In short, Sbarro intends to use bankruptcy to reboot the business on a firmer financial footing.
Source: Los Angeles Times, "Sbarro files for second bankruptcy in three years," Tiffany Hsu, March 10, 2014