The company has more than $30 million in debt. 

Michigan-based BarFly Ventures, the parent of HopCat, Stella’s Lounge, and Grand Rapids Brewing Co., filed for bankruptcy, citing “untenable” debt exacerbated by the COVID-19 pandemic. 

The company said the goal of the bankruptcy is to reduce debt and position itself for long-term growth. During the proceeding, BarFly expects to pay employee wages and benefits, pay vendors and suppliers, and honor gift cards and loyalty rewards. 

Mark Sellers, founder of BarFly, noted that increased competition and saturation of the craft beer market were also significant obstacles for the company. 

“We were meeting these challenges, and operationally the business was sound until the recent global pandemic pushed us into an unforeseen economic crisis and a 100 percent drop in revenue for almost three months,” said Sellers in a statement. “After an exhaustive examination of all options, we’ve determined that the Chapter 11 process is the best path forward to enable BarFly to focus on continued growth and transformation for the future.”

BarFly closed all of its locations in mid-March with the onset of the COVID pandemic. MLive reported that HopCat, which has 14 locations, tried takeout, but the strategy proved ineffective with the company losing cash. 

The brand was founded in 2008 with the opening of HopCat in Grand Rapids, Michigan. In the years following, HopCat’s expansion was financed through debt rather than cash to speed up growth, according to the media outlet. Then some underperforming locations shut down, and the COVID pandemic worsened matters. The brand faces more than $30 million in debt. 

“When COVID hit, that just put it over the edge,” Sellers told MLive. “We were servicing the debt up until COVID.”

Sellers spoke via Zoom before the Michigan House of Representatives Regulatory Reform Committee Wednesday and said HopCat was evicted from one location and is in default at other stores. He warned that his company isn’t the only one in trouble and that a “wave of bankruptcies” will come. 

Although its moving forward with bankruptcy, BarFly is reopening Michigan dining rooms on June 13 and reopening dining rooms in Lincoln, Nebraska, and Indianapolis, Indiana, on June 22. Other restaurants will open in phases with dates to be announced soon.

“It’s been a rough few months, but we’re excited to welcome our team and local community members back into our restaurants,” Sellers said. “We’re following all CDC guidelines and taking extra precautions to ensure the health and safety of our staff and guests.”

“ … This action should have little to no impact on our day to day business operations, but will allow us to emerge as a financially stronger company and enable us to continue serving our guests, team members, and other business partners for many years to come,” he continued. 

Other notable brands to declare bankruptcy during the pandemic include FoodFirst Global Restaurants, Sustainable Restaurant Holdings, Garden Fresh Restaurants, TooJay’s Deli, and Le Pain Quotidien

Chain Restaurants, Feature, Finance