The Elephant Bar Global Grill/Wok Kitchen casual-dining chain filed for Chapter 11 bankruptcy reorganization on Monday and has closed 16 restaurants.
Costa Mesa, Calif.-based S.B. Restaurant Co., operator of the 34-year-old chain, is seeking $3.3 million in debtor-in-possession financing to continue operating the remaining 29 units while the company looks for a buyer, according to documents filed with the U.S. Bankruptcy Court in Santa Ana, Calif.
In a statement, Robert Holden, S.B. Restaurant Co.’s president and chief executive, said the 16 closures will allow the company to “get back to focusing on operations and enhancing the concept to establish a stronger foundation for the future.”
According to the bankruptcy filing, S.B. Restaurant Co. recorded revenue of $165.5 million in fiscal 2013, a decrease from $171.4 million the prior year. Same-store sales fell 3.4 percent last year, following a 2-percent decline in 2012. Over the past six months, same-store sales have dipped 9 percent, largely on falling traffic.
S.B. Restaurant Co.’s financial woes were blamed on an overleveraged balance sheet and increased competition, combined with declines in traffic and sales, as consumers cut back on discretionary spending, according to court documents.
Efforts to turn around sinking sales — including new advertising campaigns, marketing, menu initiatives and cost-cutting programs — weren’t enough to address the impact of the sagging economy and rising commodity and labor costs, in addition to the chain’s declines in profitability, the filing said.
S.B. Restaurant Co. also has struggled to meet debt service obligations since late last year, resulting in defaults on loans.
A bankruptcy auction was seen as the “best way to preserve the jobs of their employees and maximize value for stakeholders,” the filing said.
Investment banking firm Mastodon Ventures Inc., which has been shopping the chain prior to bankruptcy, has been hired to handle the auction and is seeking a stalking horse bidder.
Elephant Bar was founded in 1980 as a concept offering an eclectic mix of globally inspired dishes, with a lively bar scene and an average check of about $18.
In 2000, the chain was acquired by private equity firm Saunders Karp & Megrue, which later became KarpReilly LLC, an active investor in the restaurant space. KarpReilly’s portfolio includes chains such as Café Rio, Café Zupas, Burger Lounge, Paxti’s Pizza, Sprinkles, The Habit Burger Grill, Z’Tejas Southwestern Grill and Hooters, according to the company’s website.
Officials with KarpReilly declined to respond to requests for comment at press time.
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