UPDATE, March 23, 2020: CraftWorks has closed its 261 restaurants after losing debtor-in-possession financing due to the COVID-19 outbreak and won't be able to keep its restaurants running during Chapter 11 proceedings, according to Restaurant Business. The company expects the shutdown to last a long time and could be permanent.
- CraftWorks Holdings, which operates restaurants and breweries including Logan's Roadhouse, Old Chicago, Rock Bottom and Gordon Biersch, has filed for Chapter 11 bankruptcy protection, according to a press release. At the same time, it has filed a motion for approval of a "stalking horse" asset purchase agreement with affiliates of Fortress Credit Co. and to initiate a competitive bidding process.
- The agreement with Fortress provides consideration of $138 million plus the assumption of liabilities and is expected to reduce CraftWorks' debt by over $140 million and create additional liquidity for future investment. Fortress has committed $23 million in debtor-in-possession financing to allow the company to maintain operations during the Chapter 11 process.
- Craftworks plans to continue operating its 261 locations, honor gift cards and continue offering its loyalty program. Thirty-seven underperforming locations have closed in recent weeks. Its 77 franchised locations will operate as usual and are not included in the proceedings.
With restaurants struggling to grow sales amid market saturation and consumers increasingly choosing to eat out via delivery or carryout instead of dining in, several brands have struggled to grow sales and customer traffic. This has been a particular problem for the casual dining segment, which relies heavily on dine-in customers versus fast casual and fast food chains. Houlihan's, Bar Louie and American Blue Ribbon Holdings have filed for bankruptcy protection so far this year.
Houlihan’s and Perkins & Marie Callender's, which filed for bankruptcy last year, used this process strategically to make it more attractive to potential buyers. But coronavirus has complicated CraftWorks' plans to emerge as a stronger, more competitive casual dining company, and could end the company, one that has has struggled for many years.
Craftworks Restaurants & Breweries acquired the 204-unit Logan's Roadhouse in 2018, and renamed the company Craftworks Holdings. At the time, the company planned future acquisitions, but none appear to have occurred since then.
As the company's largest brand, Logan's is the best indicator of the company’s growth trajectory, and it hasn't necessarily been positive. The company originally filed for bankruptcy protections in 2016, the same year its sales slipped by 11% to an estimated $587 million, according to Technomic data. Sales have continued to struggle, declining another 5.8% in both 2017 and 2018. Its sales in 2018 were an estimated $520 million. While bankruptcy will help strengthen its balance sheet and put it in a more competitive position, the company will have to focus on growing sales to make sure it doesn’t fall into bankruptcy again.