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Independent Franchise Locations Remain Open

CHICAGO (CBS) – Customers showing up for lunch at Bennigan’s restaurants in Chicago and across the country found quite a surprise Tuesday morning, when all the corporate-owned locations had signs on display reading “closed for business.”

As CBS 2’s Joanie Lum reports, Bennigan’s Grill and Tavern closed all of its corporate-owned locations nationwide after filing for bankruptcy. Independent franchises remain open for business as usual.

What do you think of the Bennigan’s shutdown? Send us your comments.

The corporate-owned locations comprise about half the entire chain. The two locations in downtown Chicago, at 225 N. Michigan Ave. and 150 S. Michigan Ave., are both among them, and the doors to both were locked Tuesday morning.

Inside, neon signs remained lit, but the “closed for business” signs shooed passersby away. Managers said the mass-shutdown went into effect at midnight Monday night, and there was no warning.

Managers of Bennigan’s location in Calumet City, and locations in Miami, Dallas and New Jersey also all confirmed to CBS 2 and our sister stations that their restaurants had shut down.

Bennigan’s spokeswoman Leah Templeton said Bennigan’s and Steak & Ale restaurants – both of which are owned by Plano, Texas-based Metromedia Restaurant Group – have filed for bankruptcy, along with the holding company S&A Restaurant Corp.

But not all stores that use the Bennigan’s and Steak & Ale names have filed for Chapert 7 bankruptcy, Templeton said in a statement. Franchise locations are not named as debtors in the bankruptcy filing and thus are not affected, she said.

The statement said a trustee would determine “future decisions regarding the affairs of the debtor companies.”

CBS 2 Legal Analyst Irv Miller explains that Chapter 7 bankruptcy means the company is being liquidated, as opposed to Chapter 11 bankruptcy, in which a company tries to reorganize and remain in business.

Miller said a Chapter 7 filing usually means a company has “major league debt,” and it is unlikely that employees would get their last paycheck. He said someone could conceivably buy the assets and reopen the full Bennigan’s chain, but that would only be after a long, drawn out court process.

The bankruptcy filing does not affect other two restaurant chains owned by Metromedia, Ponderosa and Bonanza Steakhouse, Templeton said in the statement.

One of the Bennigan’s restaurants on Michigan Avenue is located a stone’s throw from Millennium Park and the Cultural Center, the other across the street from the Art Institute. Both were popular with downtown diners, who were astounded by the development.

“I am really shocked, because there was no indication that anything was wrong,” regular customer Donna Wimes said outside the North Michigan Avenue location. “The food was good; they always seemed to generate a crowd.”

“We average going out about once a month to Bennigan’s, and then occasionally, some of my friends from work and I would come here,” said Edna Sherwood. “So they had reasonable prices and good food, so it’s definitely a surprise.”

Given the state of the economy, customer Bob Perkins said such mass-shutdowns as these are to be expected.

“The cost of food is just too high, and it’s all related, with gas prices and the economy itself,” Perkins said. “Until somebody takes a stand and does something, you’re going to keep seeing this.”

One young woman showed up at the North Michigan Avenue Bennigan’s for her very first day of work Tuesday morning, only to find the restaurant closed. She declined to be interviewed.

Alphonso Prince, manager of the Bennigan’s at 1250 Torrence Ave. in Calumet City, said he was notified of the shutdown at 12:10 a.m. from his area director, who was crying on the telephone. He said there was no forewarning about the shutdown.

“I’m angry,” Prince said. “I’m hurt; I’m devastated.”

“No blast of e-mails, nothing to say, ‘Sorry, we just can’t do it anymore,’” Prince continued, “just a phone call from my area director who doesn’t know anything, because she just found out. She’d been with the company for 21 years.”

Prince called Bennigan’s shutdown “totally unprofessional.”

He said he contacted his staff around 1 a.m., and many thought the news was a practical joke. He also had to tell a newly-hired employee she could not come to work.

Franchise Locations Remain Open
But franchise-owned restaurants said they remained open for business as usual, according to a published report in the Times Of Northwest Indiana.

Franchise owner Larry Briski told the newspaper his locations at the Railcats Stadium in Gary, Ind., and in Highland, Hobart, Elkhart, and Angola, Ind., were all open for business as usual. The newspaper reported that the franchise operators knew about the corporate-owned closures.

There is also a franchise location in Elgin, Ill., but the vast majority of Chicago area locations are corporate-owned, and thus, have closed.

The Wall Street Journal reported recently that the Metromedia Restaurant Group violated several terms of a lending agreement with GE Capital Solutions. The company prepared a bankruptcy filing, the newspaper reported.

Bennigan’s was founded in 1976. The restaurant has locations in 32 states.

The Bennigan’s Web site did not mention the closings Tuesday, and still advertised a Jameson barbecue menu and other special promotions.

CBS | Tuesday, July 29, 2008