With Midland Food Services, There’s Nothing Fast Or Casual About Bankruptcy

TheDeal.com:

Two weeks ago, it was the parent company of Bennigan’s and Steak & Ale restaurants, S&A Restaurant Corp., that filed for bankruptcy. Last week, it was a major Pizza Hut franchisee, Midland Food Services LLC.

Anyone who has driven up and down a suburban highway should be surprised. It’s a casual-dining and franchise restaurant emporium. It would be a minor miracle if more than one type would survive, given the array of choice. But that cluttered culinary landscape defied the economics — until now. People don’t eat at home unless they have to now. And that’s exactly what’s happened, thanks to the housing slump and high gasoline prices, among other causes.

The big shakeout hasn’t yet come for the suburban highway staples, but all the ingredients are there: rising labor costs due to the increase in the minimum wage; climbing prices in raw materials that can’t be passed along to consumers; unfavorable terms on multiple retail leases.

Midland Food Services found that the recipe at its 92 Pizza Hut restaurants hadn’t whet enough appetites to allow it to meet its bills when it sought bankruptcy protection to ward off default.

The company has been here before. Its Aug. 6 petition in the U.S. Bankruptcy Court for the District of Delaware in Wilmington came after it missed a $27.5 million payment that was due on to senior lender U.S. Bank NA on June 1. More than seven years ago, on Oct. 26, 2000, Midland Food Services filed a Chapter 11 petition in Wilmington for a similar reason: It couldn’t service its debt.