Pizza chain Sbarro LLC filed for bankruptcy protection Monday for the second time in less than three years and less than three weeks after being forced to close more than 40 percent of its locations.
The Melville, NY based restaurant chain filed after struggling with excess debt and too few customers in malls in which many of its restaurants are located.
Sbarro and more than 30 affiliates filed for Chapter 11 from creditors with the U.S. Bankruptcy Court in Manhattan. According to court papers, the company has between $100 million and $500 million in both assets and liabilities.
The company agreed to a pre-packaged plan upon filing, in which it had agreed to the reorganization of the company with creditors who own 98 percent of the company's debt. The plan could help Sbarro to cut its debt load by more than 80 percent. The company will invite other buyers to make offers and has also secured $20 million in new financing.
In February, Sbarro announced it planned to close 155 of roughly 400 restaurants the company owns across the North America to cut costs, effective immediately. Following the closure, the company will be leftwith 220 U.S. locations and more than 600 other locations owned by franchise operators in 40 different countries.
After restaurant closings, the restaurant is left with more than 2,700 employees and said the 582 restaurants owned by franchisees were unaffected by the filing.
Sbarro's Chief Financial Officer Carolyn Spatafora cited "an unprecedented decline in mall traffic" and an "unsustainable" imbalanced budget that needed restructuring, which included the restaurant closings, as reasons in the court filing.
"The board and senior management team are committed to ensuring Sbarro's future growth and success and today's filing is a necessary step," Chief Executive David Karam said.
Karam joined Sbarro last March from the hamburger chain Wendy's Co (WEN.O), where he was a president.
Sbarro previously filed for bankruptcy protection in April 2011, and emerged from Chapter 11 the following November.
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