Arizona-based concept Eegee’s declared bankruptcy on Friday after continued operational challenges and deepening financial problems.
The goal of the Chapter 11 proceedings is to expedite a sale. Eegee’s closed five restaurants before filing for bankruptcy—four in the Tuscon market and one in Phoenix.
Eegee’s is owned by private equity firm 39 North Capital, which bought it in 2018.
The 25-unit chain faced significant revenue declines, particularly in the aftermath of COVID. Along with the lower sales, the company’s fixed costs, such as rent and loan payments, remained unchanged. Compounding this issue were industry-wide issues, including increased wages, labor shortages, inflation in shipping and food costs, and heightened maintenance expenses.
In 2021, Eegee’s entered a $17 million credit agreement with Gladstone Capital Corporation, later amending it four times to address financial challenges. However, by late 2024, the debt ballooned to $24 million, and the company defaulted on its loan obligations. This prompted Gladstone to replace the company’s leadership and appoint a sole independent director to oversee restructuring efforts.
Many locations failed to generate sufficient revenue to cover rising operational costs. These underperforming outlets eroded overall profitability, contributing to the company’s liquidity crisis. By the time of filing, Eegee’s also owed approximately $3.1 million to unsecured creditors, including landlords and vendors, and was entangled in litigation with Sysco.
Earlier in 2024, Eegee’s engaged Mastadon, an investment banking firm, to explore the sale of its assets. Despite an exhaustive marketing process, no viable buyers emerged, forcing the company to pivot toward a bankruptcy filing to sell its assets through a structured process.
Jason Vaughn, a previous executive with Yum! Brands, Wendy’s, Lenny’s Subs, and Frisch’s Restaurants, became CEO in May 2022. His tenure ended in December.
Interim CEO Chris Westcott said the filing was a “necessary step to preserve the brand’s legacy.”
“As with many in our industry, we’ve encountered unprecedented challenges following the COVID-19 pandemic, as subsequent market conditions have created economic pressure throughout the restaurant industry,” Westcott said in a statement. “This restructuring will provide Eegee’s the opportunity to strengthen its operations while upholding the quality and service our customers know and love.”
Eegee’s was founded in 1971 by Edmund Irving and Robert Greenberg.
