Parent Company of Joe’s Crab Shack Files for Bankruptcy
Ignite Restaurant Group Inc, which owns the restaurant chains “Joe’s Crab Shack” and “Brick House Tavern + Tap,” is filing for bankruptcy protection, as dwindling sales continue to threaten its survival.
Ignite Restaurant Group, based in Houston, has sought Chapter 11 bankruptcy protection with the U.S. Bankruptcy Court in Texas. Part of the company’s struggle is attributable to an industry-wide slump in sales for casual dining restaurants.
The bankruptcy seemed likely after the company began looking for “strategic alternatives,” pointing to either a sale of the business or court protection against creditors. The company listed its debt as being somewhere between $100.0 million and $500.0 million.
Ignite Restaurant Group had previously failed to find a good purchase offer from prospective buyers as its restaurants struggled with deteriorating profits. The company has already been closing its underperforming restaurants across the country, in efforts to cut costs.
According to its latest filing, Ignite Restaurant Group is now looking to sell the business for $50.0 million to private equity firm KRG Acquisitions, which has also promised to assume some of the company’s liabilities. (Source: Ibid.)
Ignite Restaurant Group recently lost its CEO Robert Merritt, who was replaced by Joseph Tibus in April, which is around the same time that the company decided to delist from the stock market and go private. Prior to that, the group had been a publicly-traded company for five years, going public in 2012.
The company’s troubles have been a result of a widespread downtrend in the restaurant industry as customer tastes continue to change. Trendier restaurant options like “Chipotle” and “Panera Bread”—and traditional fast food joints like “McDonald’s”—have been cutting into its business. At the same time, falling food prices and grocery discounts are attracting Americans to eat at home.
Ignite Restaurant Group has been in business for roughly three decades, opening its first restaurant in 1991. The company currently operates 137 restaurant locations across 32 states, and additionally runs three franchises in Dubai.
The company reports the total headcount of its workforce to be around 8,400, which may get trimmed if the company decides to close more restaurants following its bankruptcy proceedings.