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Sbarro to file for bankruptcy protection

Author: Joel R. Glucksman

Date: March 13, 2014

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In another fast food retailer bankruptcy, pizza chain Sbarro is preparing to file for protection under Chapter 11 of the bankruptcy law, according to The Wall Street Journal. The company is in the process of soliciting votes for a pre-packaged restructuring plan, and could file by as early as March 9 if it gets the votes it needs.

The company came out from under another Chapter 11 bankruptcy filing just a little more than two years ago, according to the news source. It now carries about $140 million in debt.

Initially, Sbarro met great success with strategically placed locations inside U.S. malls, but the economic downturn and other factors have significantly reduced mall traffic in recent years, leading to decreased profits for the chain. Retail store traffic overall was down 14.6 percent in November and December compared to the same two months – referred to as the “holiday season” – last year, according to ShopperTrak research, and is expected to decline an additional 9 percent in the first quarter of 2014.

As a result of this loss, Sbarro announced in February that it will be closing 155 of its 400 U.S. locations in order to cut costs, according to Entrepreneur. After the closures, the company will be left with about 800 locations worldwide.

The Wall Street Journal reports that the chain has been trying to open more stand-alone restaurants and use fresher ingredients in an attempt to re-target its strategy to the realities of the modern market. A Sbarro spokesperson declined to comment on the bankruptcy to the news source, but said that the company’s new management team had been “thoroughly evaluating the business” over the previous nine months.

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