After financial woes prior to COVID-19, Belgian bakery chain Le Pain Quotidien has agreed to sell its U.S. assets to restaurant operator Aurify Brands for $3 million through a Chapter 11 bankruptcy proceeding.

The two sides negotiated an asset purchase agreement on Tuesday in which Aurify would reopen at least 35 of the 98 stores, which all closed due to the COVID-19 pandemic.

The bankruptcy filing said the proposed sale would avoid a Chapter 7 bankruptcy, or a complete liquidation of assets.

Aurify has investments in Melt Shop, The Little Beet and The Little Beet Table, Fields Good Chicken, and Five Guys.

The domestic stores use a license to operate under Le Pain Quotidien’s brand. Aurify successfully bid for the U.S. franchise rights in Belgium, where the restaurant’s parent company is in the midst of an insolvency proceeding.

Pre-COVID, Le Pain Quotidien’s U.S. business operated 98 restaurants and employed 2,500 workers across New York City, the Mid-Atlantic, California, Illinois, and Florida.

According to the filing, the chain was experiencing financial issues prior to the pandemic. In 2019, U.S. stores earned $153 million in sales and witnessed a loss of $4.4 million in EBITDA, down from $175 million in sales and $16.8 million in EBITDA in 2018.

The restaurant’s downfall was trigged by several pressures: saturation of the market, expensive leases, underperforming stores, corporate turnover, changes to the supply chain and store staffing strategies, lack of investment in remodels and digital platforms, and an industry shift to off-premises.

In 2019, Le Pain Quotidien attempted to address its issues with multiple initiatives, including acceleration of its to-go and digital channels.

The chain launched a pilot “Grab N’ Go” program in early 2019 with a goal of doubling takeout sales in the next 18 months. Le Pain Quotidien also focused on remodeling existing stores as opposed to opening new locations. To boost its digital presence, the restaurant implemented self-ordering, customization, and checkout and created a newly designed U.S. website and app.

To improve its cost structure, the company developed a method to better track and monitor its G&A expenses, and it addressed productivity via store level management structure, performance forecasting and accountability, kitchen efficiency, and upgraded equipment.

In addition to operational initiatives, the chain began evaluating restructuring alternatives in September. Over time, it became clear that bankruptcy would be necessary. In February, the chain started planning for a potential in-court restructuring.

The onset of the COVID-19 pandemic in March definitively ruined those plans.

When dining rooms closed, the chain attempted to operate via off-premises at some stores, but it wasn’t profitable. By March 22, every restaurant shut down and all but a few employees were terminated.

The brand hired SSG Advisors to conduct a marketing process, which eventually led to the deal with Aurify.

Alain Coumont first opened Le Pain Quotidien in Brussels, Belgium, in 1990. Seven years later, the first U.S. location opened on Madison Avenue in New York City. At one time, the restaurant operated 290 units globally.

Other notable brands to file for bankruptcy amid the COVID-19 pandemic include TooJay’s Deli, Sustainable Restaurant Holdings, FoodFIrst Global Restaurants, Garden Fresh Restaurants, and 49-unit IHOP franchisee CFRA Holdings

Finance, Story, Le Pain Quotidien