Quiznos Corp., the Denver-based toasted-sandwich chain, filed for bankruptcy just days after pizzeria company Sbarro LLC sought protection from creditors, as competition among fast-food restaurants grows in a tight market.
“It’s a survival of the fittest,” Bob Goldin, executive vice president at Chicago-based restaurant researcher Technomic Inc., said in a phone interview before the filing. “The market is not growing, or it’s barely growing, so the weak players are getting weeded out.”
Competition among U.S. restaurants has been increasing as newer fast-casual chains expand quickly. Sbarro filed for bankruptcy on March 10, while the owner of Hot Dog on a Stick filed last month, as foot traffic in shopping malls dwindled and chains such as Panera Bread Co., Chipotle Mexican Grill Inc. and Subway Restaurants cut into their business.
Quiznos listed debt of more than $500 million in Chapter 11 documents filed in U.S. Bankruptcy Court in Wilmington, Del. It’s seeking to implement a plan that it said would cut debt by $400 million. Senior lenders “overwhelmingly” support the plan and the chain will continue operations during reorganization, according to a company statement.
The company said it will seek court approval of a $15 million loan from its senior lenders to continue operations as it restructures. It said business won’t be interrupted and obligations to customers and workers will be met. The company expects to execute its restructuring plan and emerge from bankruptcy on an “accelerated basis,” according to the statement.
U.S. Bank NA is owed $173.8 million plus interest, according to court papers, making it the largest creditor whose debt is unsecured by collateral. Trade creditors include bakeries and Walt Disney Co.’s ESPN.
In 2012, Quiznos underwent an out-of-court financial restructuring that eliminated about $300 million in debt and gave majority ownership to billionaire Marc Lasry’s Avenue Capital Group LLC through a $150 million equity infusion and debt-to-equity swap.
Quiznos, founded in 1981, operates restaurants in all 50 states and 34 countries, according to its website. It has about 2,100 stores, all but seven of them franchised, according to the company’s statement. There were a few Quiznos restaurants in Western New York, but they have closed.
The chain sells toasted sub-style sandwiches and recently added pasta dishes, such as chicken pesto and macaroni and cheese with bacon, to its menu.
“They expanded too fast, they had a weak franchisee network,” Goldin said. “Once the Paneras of the world came along, I think, many consumers thought that was a better quality price point. And Subway came in on the lower end and aggressively promoted themselves as fresh.”