Sbarro, the pizza chain found in hundreds of malls across America, filed for bankruptcy court protection Monday, less than a month after announcing that it would be closing 155 of about 400 restaurants it owns in North America to cut costs.
According to Associated Press, Sbarro and more than 30 affiliates filed for Chapter 11 bankruptcy protection from creditors with the U.S. Bankruptcy Court in Manhattan. It is the second time in three years the company has had to file for bankruptcy, following a trip through bankruptcy proceedings in April 2011 and in November 2011.
The pizza restaurant is claiming that low foot traffic in malls has led to decreasing pizza sales. The Mehlville, New York-based Company has "between $100 million and $500 million in both assets and liabilities," according to court papers.
According to The Wall Street Journal, Sbarro stated that its lenders have agreed to trade $140 million in debt for control of the business after it is reorganized. The company will be provided with $20 million in order to restructure.
"The agreement among the company's lenders is an indication of the support and confidence they have in the growth strategies developed by the new management team over the past nine months," David Karam, Chairman and Chief Executive Officer, said in a statement.
After the chain closes some of its restaurants it would be left with 220 U.S. locations and more than 800 other locations owned by franchise operators in 40 different countries. The closings will leave more than 2,000 people unemployed.
According to spokesman Jonathan Dedmon, there will be no further restaurant closings under the bankruptcy plan. The combination of money provided and the closing of a large number of its restaurants will reportedly help the chain reduce the company's debt by 80 percent.
"The previous closures and bankruptcy filing are part of an overall plan to invest in and grow the company for the future," he said.
Last month Sbarro's fellow mall chain, Hot Dog on a Stick, filed for bankruptcy, citing "the negative impact from" the mall trend, the AP reported.
Sbarro, which is best known for locations in airports, malls, train stations and highway rest stops, was founded in Brooklyn, New York in 1956, by Gennaro and Carmela Sbarro, a married couple who had immigrated from Italy.
