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Bret Thorn
PITTSBURGH Fifty-unit barbecue chain Damon’s Grill has filed for Chapter 11 bankruptcy protection, just days after its sister brand, Max & Erma’s, did the same.
Both restaurant chains are owned by G&R Acquisitions Inc., led by Pittsburgh-based developer Gary Reinert Sr., and both are based in Columbus, Ohio. The financial dealings of Damon’s and Max & Erma’s are intertwined, as Damon’s equity has been used as collateral for a loan to Max & Erma’s, which was in default last year to the tune of $23 million. Max & Erma’s filed for Chapter 11 bankruptcy protection last week.
Max & Erma’s, a 105-unit casual-dining chain, had planned to pay back its defaulted loan with the proceeds from deals to sell corporate restaurants to franchisees. Reinert had negotiated more than $25 million in deals to sell corporate Max & Erma’s units to franchisees, his spokesman said, but the financial market meltdown of last year dried up financing for the potential buyers.
Restaurant consultant Tracy Coats, speaking on behalf of Reinert, said Friday that Damon’s filed for bankruptcy protection to keep its stock from being taken over by its creditor, National City. The bank is now part of PNC Financial Services Group Inc.
“Damon’s cash flows very nicely, and you want that cash flow to pay for Max & Erma’s debt,” he said.
Damon’s listed both assets and liabilities of between $1 million and $10 million, according to documents filed in the Western Pennsylvania bankruptcy court. Its top five creditors are Southeast Capital of Charlotte, N.C., which is owed $800,000; Sysco Baltimore, which is owed $535,578.43; North Star Foodservice of Twinsburg, Ohio, which is owed $529,414.21; Ping Wang Chiang of Cleveland, who is owed $153,000; and Bahkta, the landlord of a corporate unit in Lexington Park, Md., according to that restaurant’s manager. The landlord is owed $144,795.000.
Damon’s has been undergoing restructuring since Reinert bought it in 2008. The number of locations for the brand has shrunk from 80 last year to 36 franchised and 13 corporate restaurants currently, following the latest closures of two units in the Columbus area this month.
Contact Bret Thorn at [email protected].
