Thompson Law Group, P.C.

Restaurant chains can get reorganized through Chapter 11

Chapter 11 rehabilitation for restaurants and fast food operations is no stranger to Pennsylvania bankruptcy attorneys. As with any other business, a restaurant or small chain of eateries may encounter cash flow problems and get behind on debt obligations. That problem may be partly caused by the state of the economy, and sometimes is also caused by overzealous growth that needs to be controlled. In Chapter 11, while the company's owners take steps to re-structure debt and attract investment mechanisms, the restaurants themselves may stay open and continue to generate revenue to strengthen the company's emergence from bankruptcy.

A restaurant chain from another state that owns and runs about 28 restaurants filed for Chapter 11 protection recently. Company executives for Olga's Kitchen say that they want to restructure debt or to potentially sell the business. The company has closed a number of unprofitable operations in the past year in an ongoing effort to restructure and try to survive.

The chain, which has most of its remaining locations in Michigan, is famous for its Mediterranean style wrapped sandwiches. It was founded by Olga Loizon in 1970 and grew to a size of 50 restaurants. It has since downsized its locations to stop runaway growth and streamline expenses. Loizon, who is now 89, remains involved but is no longer running the operation.

The company owes banks, other lenders, legal fees and some credit account extensions. While in Chapter 11 proceedings, it will be able to better assess its outlook for survival. Sometimes a company agrees to take investors into the company as co-owners in return for raising enough capital to safely be able to emerge from the bankruptcy in strong financial shape. The strategic moves that are executed to maneuver through a reorganization bankruptcy are pretty much the same in Pennsylvania and all other bankruptcy jurisdictions.

Source:, "Olga's seeks to restructure debt in bankruptcy, emerge with new owner", Brent Snavely and Frank Witsil, June 13, 2015

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