Mac Acquisition LLC, the owner of Romano’s Macaroni Grill, filed for chapter 11 bankruptcy protection Wednesday, citing a shift in customer preference and an “overall downturn for the casual dining industry.”
“The preferences of such customers have shifted to cheaper, faster alternatives. On the other end of the spectrum, there is a trend among younger customers to spend their disposable income at non-chain ‘experience-driven’ restaurants, even if slightly more expensive,” Chief Executive Nishant Machado said in court papers.
The Italian chain said its 93 operating units will remain open, although 37 have closed since the beginning of the year due to unprofitability. The Denver-based company employs more than 4,500 people. Romano’s Macaroni Grill brought in revenue of about $230 million last year.
Romano’s Macaroni Grill has struggled to gain momentum as it has changed hands in recent years. Ignite Restaurant Group purchased the brand for $55 million in 2013 before selling it two years later to Red Rock Partners LLC for just $8 million in cash. The brand, which was founded in 1988, had 150 units at the time.
Ignite Restaurant Group and its Joe’s Crab Shack and Brick House Tavern + Tap brands sought chapter 11 protection in June. The company was then won in a bankruptcy auction by Landry Inc.’s Tilman Fertitta, the Houston billionaire who owned Joe’s Crab Shack in the 1990s before selling it in 2006 to JCS Holdings LLC for $192 million. Fertitta, the new owner of the NBA’s Houston Rockets franchise, bought the two brands for $57 million this time around.
Romano’s is set to appear before Judge Mary F. Walrath Thursday in an attempt to win approval on first-day matters, including the use of its bankruptcy loan. Raven Capital Management is providing the company with a $5 million loan so it can remain open during the chapter 11 case.
Machado said in the court papers that RedRock Partners LLC has struggled to service its debt since purchasing the brand and that its debt-restructuring plan has the backing of Riesen Funding LLC and Bank of Colorado. Riesen Funding is the ultimate indirect equity owner of the company.
“At all times since RedRock acquired the debtors, the debtors’ operations have failed to produce sufficient cash flow to cover all operating expenses and to service their debt obligations,” the document said. “The debtors’ trailing twelve month EBITDA as of August 2017 was approximately negative $12 million. This financial performance reflects all restaurants, including closures. The debtors’ losses were the product of several factors, including a decrease in the debtors’ top line sales and its profit margins as a result of increased costs for both commodities and labor.”
Mackinac Partners, a nationally recognized financial advisory firm with a track record of turning around struggling companies, especially restaurants, is advising Romano’s with “respect to needed changes in their operations.”
A “Proposed Plan,” the document said, would help preserve about 4,600 jobs and assume most of Romano’s leases and contracts, “providing substantial benefits to the parties to these contracts.”
The news arrives the same week as Ruby Tuesday’s announcement it was being taken private after being purchased by private equity group NRD Capital in a deal valued at $146 million. The nearly 600-unit Ruby Tuesday has closed more than 100 restaurants in the past year.