Garbanzo Mediterranean Grill LLC and affiliated companies filed for Chapter 11 reorganization on Aug. 12, joining a growing list of restaurant chains seeking bankruptcy protection.
The Centennial, Colo.-based chain filed in U.S. Bankruptcy Court for the Eastern District of Missouri. James Park, Garbanzo’s CEO, said in a statement Friday that the move was “entirely brought on by the unprecedented and the sudden impact of COVID.”
“During this time, our Garbanzo restaurants will remain open with normal operations. We will also continue to provide the same superior service and support to our team members, customers and franchisees; as they are the backbone of our success,” said Park.
In court filings, Park said the chain — which includes four company-owned and 21 franchised locations — had been struggling and in February sought the help of a restructuring advisor.
As of Dec. 24, 2019, the company reported negative retained earnings of about $22.5 million and long-term liabilities of about $15.6 million. In 2019, the company experienced a loss of about $2.2 million. At the point of filing, the company said it had about $17.5 million in debt.
When the pandemic hit, Garbanzo, like most restaurants, was limited to delivery and takeout. Catering, which Park said was typically the company’s most profitable line of business, was also cut off.
Park said between March and mid-May, overall sales were down between 50% and 75%, and more recently are down 20% on average compared to recent years, but catering sales are still down an average 90%, as is franchising royalty income. Park said franchisees have also seen a “quick and severe” drop in sales, with about 42% of Garbanzo locations near college campuses, which closed in March.
“With no other alternatives available, the debtors entered these bankruptcy proceedings to preserve the value of their business and assets,” Park said in the filing.
The fast-casual Mediterranean concept rebranded in 2016, changing its name to Garbanzo Mediterranean Fresh as part of a larger effort to modernize the brand. Park joined the chain as CEO in 2015.
Garbanzo joins a growing list of restaurant chains that have sought bankruptcy protection, including California Pizza Kitchen, CEC Entertainment, franchise operator NPC International and Sustainable Restaurant Holdings.
For our most up-to-date coverage, visit the coronavirus homepage.
Contact Lisa Jennings at email@example.com
Follow her on Twitter: @livetodineout