Owner of popular fast-food chain files Chapter 11 bankruptcy (again)

Published 12:02 pm Tuesday, February 13, 2024

Sometimes a company files for bankruptcy because its continued existence benefits not just its owners, but also its vendors. Mall operators Simon Property Group and Brookfield Asset Management, for example, helped bring J.C. Penney out of its Chapter 11 bankruptcy.

It did that with support from many of the chain’s vendors who were willing to take pennies on the dollar for old debts in order to keep the new version of the company as a customer. The mall operators simply didn’t want to be stuck with huge empty spaces at a time when anchor tenants have become harder to come by.

Related: Popular clothing retailer faces Chapter 11 bankruptcy, cash crisis

Making a deal like this means that a lot of people have to see the upside in a company staying open. In many cases, a key vendor ends up taking over the business because losing it as a customer would be a catastrophic failure.

At other times, however, vendors don’t want anything to do with saving a business that has not paid its bills. If no deal can be reached over past debt, either forgiving it, or turning it into equity, then a Chapter 11 bankruptcy generally becomes a Chapter 7 liquidation.

That situation may be rapidly approaching for a once high-flying fast food/fast casual brand that was once owned by McDonald’s.

McDonald’s also once held equity in Chipotle.

Image source: Shutterstock

Boston Market may be near the end

At one time, Boston Market grew from a single location in Newton, Mass., a Boston suburb to a regional phenomenon. That growth, however, flamed out and the the company filed bankruptcy in 2000 with McDonald’s (MCD) stepping in to rescue it.

The match was never an easy one as the Golden Arches, which once had a financial stake in Chipotle Mexican Grill, has never been adept at operating outside its core brand. McDonald’s sold the brand to Sun Capital Partners where it began a slow decline before Jay Pandya acquired the brand in 2020.

That acquisition has not gone well as the chain has shrunk to under 300 stores and had its Colorado headquarters seized over tax debt. The company faces eviction at many of its remaining locations and has been ordered to pay $11.9 million to US Foods, a judgment issued after the company more or less chose to ignore the lawsuit.

Now, Pandya has filed for Chapter 11 bankruptcy just a couple of months after a judge in the Eastern District of Pennsylvania Bankruptcy Court threw out his first petition because the filing did not contain all the required documents. The beleaguered Boston Market owner, who faces “hundreds” of lawsuits “failed to respond to court orders, including repeated requests for more information over the course of two weeks,” according to Nation’s Restaurant News.

Boston Market continues to operate

While going to court with your largest food vendor over unpaid bills does not make things easy, Boston Market’s remaining locations continue to operate. It’s unclear how long that will last and the brand could be sold off as part of Pandya’s bankruptcy filing, which listed between $10 and $50 million worth of debt.

The filing also shows that Pandya owes money to the IRS, US Foods, and for some reason, Pizza Hut.

Boston Market, which was originally known as Boston Chicken, built its business by offering rotisserie chicken at a time when it wasn’t a grocery store staple. The chain has expanded its menu to offer other proteins, but it has been hurt by companies like Costco and Publix essentially commoditizing rotisserie chicken using it as a traffic-driving loss leader.

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