Chicago’s own Giordano's, one of the most popular purveyors of stuffed pizza, is filing for bankruptcy protection.
It’s not unusual to hear of any business filing for bankruptcy in these tough economic times. During the Recession, less consumer demand and fewer customer orders often caused a rise in inventory, losses in sales margins, and high debts with no solution other than going out of business or restructuring via a Chapter 11 bankruptcy.
But for a culinary institution like Giordano’s, the story was different. As The Chicago Times put it, “It wasn't the pizza, it was the real estate.”
It turns out that throughout a five-year period during which many other restaurants lost business, served fewer customers, and eventually were forced to close shop, Giordano’s had actually thrived. But while the profitable Italian food chain had plenty of customers and locations to serve them, serving in more than 55 locations in two states, its parent company could not keep up with the real estate collapse.
Giordano's, which is now seeking Chapter 11 protection, is owned by John and Eva Apostolou. The Apostolou family also owns Randolph Partners LLC, a real estate holding company, which has been unable to lease or sell several commercial properties in Florida and Illinois. The resulting defaults on real estate loans affected lending for the pizza business, leading Giordano’s to join the other Apostolou businesses that all filed for bankruptcy simultaneously.
The Tribune reports that the Apostolou family recently won court approval to continue operating the restaurants; but a bankruptcy-fueled reorganization could result in the possible sale of Giordano's, which has been owned by the Apostolou family for more than 20 years.
Now experts are suggesting that many family-owned restaurants wrapped up in the real estate reckoning could soon follow a similar fate to stuffed-pizza icon Giordano’s. According to The Tribune, “Randee J. Becker, president of Restaurants, a real estate brokerage firm, said she expects more restaurant bankruptcies by operators that should have sold their financially shaky operations eight to 10 months ago. In the last two weeks, Becker said four restaurant owners called about wanting to sell. ‘I'm finding that even though we are at the tail end of the recession, restaurant owners are hanging on to a dream that has already failed,’ Becker said.”
If you’re a restaurant owner or own another type of small business and you find yourself in a similar situation as the Apostolou family—struggling with high real estate prices or a mortgage that means mounting debt—you may be wondering if Chapter 11 bankruptcy is right for you.
In fact, Chapter 11 bankruptcy has historically been a way to help beleaguered business owners restructure their companies for a more fortuitous financial future. Like Chapter 7 and 13 personal bankruptcies, Chapter 11 also employs the automatic stay, putting a stop to foreclosures, repossessions and other creditor actions to help you buy some breathing room to figure out your next business steps. In addition, many individuals with extra-high debt loads are also reaping the rewards of Chapter 11, including liquidation-style options for debtors with regular income and unsecured debt more than $336,900 and secured debt more than $1,010, 650.
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