Wednesday, June 7, 2017

Joe's Crab Shack Files For Bankruptcy



The owner of the Joe's Crab Shack casual dining chain filed for Chapter 11 bankruptcy on Tuesday amid falling sales, and plans to sell the company for at least $50 million to a private equity firm, according to a court filing, reports CNBC.

Ignite Restaurant, which also owns the Brick House Tavern + Tap chain, has been closing weaker locations and began to pursue a sale of the business last year, according to court documents.

However, as operations continued to worsen through early 2017, interested bidders withdrew their proposals and Ignite began to consider bankruptcy, according to a court filing by Jonathan Tibus, the company's acting chief executive officer.

Ignite owns 112 Joe's Crab Shack restaurants and 25 Brick House locations, according to court documents. The Crab Shack chain was founded in Houston in 1991 and Brick House was launched in 2008.

This does not appear to be a business cycle related bankruptcy. When those hit they hit hard across the capital goods sector.

Casual dining chains have struggled with changing tastes. according to CNBC.

Part of the problem is also cost operational as laws boosting minimum wages continue to increase across the country.

The brand will continue to operate under emergency bankruptcy supervision with KRG Acquisitions opening bidding in a court-supervised auction.

KRG is willing to pay $50 million and assume liabilities. But the chain will continue with "a substantial reduction in the number of employees," many of whom who will be "synergized" and "restructured" away.

Thank you minimum wage laws.

 -RW 

2 comments:

  1. Millennials are eating more at home now and bet quality food style- fast casual like Panera Bread and Chipotle places. Those type of places have been hurting all the casual dinning places like Joe's, Applebees and Buffalo Wild Wings.

    Operation costs may have something to do with it but remember servers are paid below minimum wages and depend on tips for a living, Bob.

    I would chalk up the demise of Joe's Crab Shack to demographic changes in diets.

    ReplyDelete
  2. And maybe just poor leadership? There doesn't always have to be macro market reasons for business failures.

    ReplyDelete