DENVER Vicorp Restaurants Inc., parent of the venerable Village Inn and Bakers Square family-dining brands, said Thursday that it has filed for Chapter 11 protection from its creditors and has closed 56 underperforming restaurants across the country.
The privately held, Denver-based company said it would continue operating with the assistance of $60 million in financing from prepetition lenders. The operator and franchisor also is using its cash flow to maintain operations as it attempts to restructure its debt, said chief executive Ken Keymer. The financing arrangement is subject to bankruptcy court approval, Vicorp said.
Saddled with $126 million in debt, Vicorp closed 56 underperforming across the country Wednesday afternoon, including 23 Village Inns and 33 Bakers Squares. Local newspapers reported closures in Iowa, Illinois, Michigan and Wisconsin. About 1,300 employees were let go, said a company spokesman. Vicorp said it would continue to operate its pie manufacturing and distribution business.
Founded in 1958, Vicorp has spent the past several months remodeling several Bakers Square units in the Milwaukee area and a Village Inn in metropolitan Denver. The updated stores incorporated fast-casual-like, store-within-a-store concepts.
Vicorp had hired Piper Jaffray in January to help it negotiate with its lenders. In the company’s latest financial report, for its fiscal third quarter ended July 12, Vicorp’s net loss increased more than four-fold to $5.7 million and its adjusted earnings before interest, taxes, depreciation and amortization was slashed nearly in half to $5.6 million. The company suffered from flat sales and escalating costs, including a large interest expense burden of about $6.6 million that has been on the books for at least a year. Revenues for the third quarter rose 1.6 percent to $106.9 million, and the company’s food and labor costs alone rose 6.9 percent year to year.
“After a thorough analysis of Vicorp’s financial condition, the company concluded that today’s court filings were both prudent and necessary,” Keymer said. “Although we have taken many steps to address the challenges we face, these steps were not enough to allow us to address our substantial debt obligations.”
Vicorp is owned by Southfield, Mich.-based private-equity firm Wind Point Partners, which purchased it in 2003 for $225 million. The company said in its statement that it operates 250 restaurants under the Village Inn and Bakers Square brands and franchises another 93 Village Inns.