Well, it looks like closing 155 of its North American restaurants in February didn’t help cut costs enough for everyone's favorite food court pizza chain. Sbarro filed for bankruptcy today, along with 30 of its affiliates. They’re somewhere in the neighborhood of $500 million in debt, according to the Chapter 11 petition they filed; they noted in a statement that they’re planning to use court protection to reorganize and close underperforming stores as quickly as possible in a plan the holders of most of its debt already support.
“The agreement among the company’s lenders is an indication of the support and confidence they have in the growth strategies developed by the new management team over the past nine months,” said Sbarro CEO David Karram. Lenders are providing $20 million in financing, with the hopes that the reorganization will eliminate $140 million’s worth of the company’s debt.
So what’s to blame for this loss of cheesy goodness? Perhaps surprisingly, it may not just be bad business sense. According to Business Week, customer traffic has slowed dramatically in the mall food courts in which Sbarro has long been a staple. This is purely conjecture on my part, but I suspect it’s because so many people these days are doing their shopping online. I mean, think about it: When was the last time you set foot in a mall? I honestly couldn’t tell you, and I’m sure I’m not the only one. Fewer people shopping in malls means fewer people eating greasy, terrible-for-you lunches in mall food courts.
Now, here’s the kicker: Sbarro has filed for bankruptcy before…and the last time was less than three years ago. Originally a family-run company, Sbarro was acquired by MidOcean Partners LP in January 2007 for $417 million. In 2008, the chain reported losses on higher costs for ingredients; they filed for Chapter 11 protection in April of 2011, emerging (they thought) victorious in November later that year. Looks like they spoke too soon, though. Whoops.
In the meantime, though, rest assured that there are plenty of other places to get your pizza fix — and odds are they’re better than Sbarro, anyway. Eat up!
