Bankruptcy doesn’t discriminate, especially for restaurant companies.
The foodservice industry operates on the tightest of margins, and for the past few years many restaurants have taken on loads of debt, whether to support the merger-and-acquisition rush or to garner funds for expansion. With declining sales during the recession, increasing food costs and banks that can’t let lending covenants slip, the industry has been ripe for bankruptcy filings.
Chapter 11 bankruptcy court documents originate from all segments of foodservice. The Glazier Group, owners of Michael Jordan’s Steakhouse in New York and other upscale restaurants, filed late last year. Quick-service pizza operator Sbarro Inc. filed in April. Family-dining company Perkins & Marie Callender’s Inc. filed just this month.
Last week, TheStreet.com, an online media company that covers investing and finance, explored 20 restaurant stocks, outlining each company’s potential for bankruptcy. The exercise relies on a system of rankings — the Altman Z-Score — it said was developed by New York University professor Edward Altman in the late 1960s.
The system measures several aspects of a company’s financial health, according to TheStreet.com, including working capital, total assets, total liabilities, market capitalization, sales, retained earnings and earnings before interest and taxes.
The restaurant stocks at risk of bankruptcy run from Red Robin Gourmet Burgers Inc. as the least risky to Cosi Inc., which was deemed the most at risk for a pending Chapter 11.
The content from TheStreet.com does not necessarily reflect the views of Nation’s Restaurant News.