Report: Sbarro may file for Ch. 11 bankruptcy

Two weeks after announcing the closure of 155 company-owned restaurants, Sbarro LLC is reportedly preparing to file for Chapter 11 bankruptcy protection for the second time in three years.

According to a report in the Wall Street Journal, the brand of more than 800 locations worldwide is soliciting votes for a “prepackaged restructuring plan” that could result in a filing as early as Sunday.

“We cannot comment on market rumor or speculation,” Jonathan Dedmon of Chicago-based The Dilenschneider Group said in a statement made on behalf of Sbarro. “But during the past nine months, our new management team and its advisers have been thoroughly evaluating the business. We are making significant progress. Sbarro continues to be a strong brand with a bright future.”

Sbarro last filed for Chapter 11 bankruptcy protection in April 2011, as struggles with high commodities in 2007 and 2008 preceded the Great Recession, which wreaked havoc on consumer spending in malls and airports, where most of Sbarro’s restaurants are located. The brand exited Chapter 11 four months later in August 2011, reducing its outstanding debt from $405 million to a $110 million exit term loan facility.

Jim Greco was named president and chief executive of Sbarro on Feb. 1, 2012, and he resigned 13 months later. J. David Karam has served as chief executive of the company ever since.

Prior to last month’s closures, Karam and other Sbarro officials had shared upbeat plans to expand with freestanding, fast-casual restaurant concepts, including Pizza Cucinova and a new prototype called Sbarro Brooklyn Fresh.

According to NRN’s Top 100 census of chains ranked by U.S. systemwide sales, Sbarro’s domestic sales fell 5.66 percent in its 2012 fiscal year to $400 million, compared with $424 million in fiscal 2011. The report also found that Sbarro’s total domestic unit count fell 3.27 percent to 591 locations in fiscal 2012 and that the chain’s market share within the Top 100’s limited-service specialty segment decreased.

Sbarro is based in Melville, N.Y.

Contact Mark Brandau at [email protected].
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