Dallas-based fast casual Corner Bakery filed for bankruptcy Wednesday, citing ongoing struggles with the pandemic and a battle for control with a creditor.
The urban concept, with approximately 140 restaurants across roughly 20 states from California to New Jersey, has seen sharp declines in earnings and revenue, largely because of office closures. A significant part of the chain's revenue comes from catering for work places and serving lunch and breakfast to commuters.
But Corner Bakery experienced dropping AUV even before the pandemic, leading it to hire DLA Piper as restructuring counsel. At the time, Corner Bakery was owned by Roark Capital, the same private investment firm backing Inspire Brands and Focus Brands. In the fall of 2020, the chain was sold to Pandya Restaurant Growth Brands, which had also purchased Boston Market a few months earlier.
Since 2020, the chain's core business has "remained strong," court documents state, but the company has still suffered from inflationary costs, supply chain disruptions, the challenging labor market, and impatient landlords. Many units are profitable, but others are underperforming and "burdening the company." Corner Bakery defaulted on its credit facility in 2022.
The restaurant spent time working with lenders on a payoff plan in the range of $20 million to $24 million. But around January 31, it was notified that SSCP Restaurant Investors had bought its debt.
Corner Bakery alleges in the court filing that it tried to make payments and submitted requests for a reconciliation of payments to the account, but that SSCP wouldn't listen and intended to foreclose on the company's assets. SSCP scheduled a sale of collateral for February 23. The conflict prompted Corner Bakery to file bankruptcy.
"As a result of the discord with SSCP and the vulnerable state of its financial condition, the Debtors have determined that a substantial deleveraging combined with new capital investment is the best path forward for their business as a going concern and will serve as the foundation of a reorganization plan that will payoff the company's creditors while also preserving stakeholder value," court documents state.
Corner Bakery is in the process of reviewing SSCP's books and records. The filing states the company reserves the right to challenge the amount owed to SSCP.