Strategy

Buffet Chains’ Owner Goes Chapter 11 Again

The operator of HomeTown Buffet and other chains says an $11.3 million court award in a food poisoning case prompted the bankruptcy filing.
Matthew HellerMarch 7, 2016

Chapter 11 is back on the menu for the operator of HomeTown Buffet and other casual family restaurant chains, which filed bankruptcy on Monday for the third time.

Buffets LLC’s sales are down 22% this year and the company closed 74 restaurants in February as part of its national restructuring plan. Its brands include Ryan’s, Fire Mountain, Country Buffet, Old Country Buffet, Tahoe Joe’s Famous Steakhouse, and HomeTown Buffet.

The chains were formerly run by Ovation Brands, which, as Buffets Inc., sought bankruptcy protection in 2008 and 2012. Buffets LLC, an affiliate of Food Management Partners, paid an undisclosed amount in August 2015 for the Ovation chains.

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FMP blamed the latest Chapter 11 filing on “the discovery of liabilities, or alleged liabilities, that we believe were not disclosed” in the negotiations over the merger, including an $11.37 million default judgment in a case alleging an Old Country Buffet restaurant in Wyoming was liable for the food poisoning of a Nebraska couple.

“[The] lawsuit was not disclosed by the sellers, and Buffets LLC is attempting to overturn such judgment on the basis of the wrong defendant entity having been sued and other grounds,” FMP said in a news release.

Buffets LLC said in court papers it believes it can return to profitability once it sheds its unprofitable restaurants and deals with the judgment against it. “We are completely committed to the continued operation of these brands, and this is a necessary step for us to take to make this happen,” an FMP spokesman said.

Like other casual eateries, the Wall Street Journal said, Buffets “has suffered in recent years as cash-strapped diners cut back on eating out.” It currently operates more than 150 buffet restaurants in 25 states and 10 steakhouses under the Tahoe Joe’s brand.

Buffets owes its senior lenders $46.2 million and also has more than $60 million in unsecured debt. Through its last bankruptcy reorganization, it shed $255 million in debt and $35 million in annual interest payments.