Citing high rents, changing customer demographics, and increased competition, Scotty’s Brewhouse filed for Chapter 11 bankruptcy protection and will shutter Indiana restaurants in Carmel, Muncie, and Downtown Indianapolis. The Muncie store is Scotty’s original location. According to documents filed December 12 in U.S. Bankruptcy Court in Indianapolis, the company, which also operates Thr3e Wisemen Brewing Company, will close another store in Waco, Texas. It said seven additional profitable locations would remain open and are generating enough cash flow to keep the company afloat. The locations included in the bankruptcy filings are all company run. The chain has a total of 17 restaurants, seven of which are operated under management agreements and not part of the bankruptcy filings.
Thr3e Wise Men Brewing Co., which has locations in Broad Ripple and Muncie, Indiana, and A Pot & Pans Production LLC, which provides management services for the Scotty’s restaurants, filed for Chapter 11 bankruptcy protection as well.
Founder Scott Wise sold the chain to Arizona-based Due North Holdings LLC in December 2016. Wise founded Scotty’s in 1996. Due North, at the time of the purchase, said it planned to expand the brand to 100 locations in the next five years, in the U.S. and abroad. The deal included all 15 brewhouses at the time and two Thr3e Wisemen locations.
According to the IndyStar, Wise turned down other offers to buy the company “because he didn’t think their vision matched his.” Wise wrote this on a Facebook post following the deal that said: “Twenty years ago when I started this restaurant and worked alone as the cook, waiter, bartender, bouncer and accountant—I dreamt about this day when I could, not only, sell my company; but, find a partner that believed in my vision to keep my team in place, allow me to continue to guide and lead the ship and give me the resources and capital to continue our growth across the country and even internationally.”
Due North was not named in the filings. Due North vice president Berekk A. Blackwell was identified, however, as the sole manager of each of the debtors. Blackwell is also listed as manager of Scotty’s Holdings LLC, according to Indiana Secretary of State records, per the Indianapolis Business Journal.
In the bankruptcy declaration, documents said: “The Scotty's Brewhouse brand is strong and has a successful track-record of 22 years. The goal of these Chapter 11 cases is to close the four struggling locations.” The company said it is filing for bankruptcy to end the leases at the underperforming restaurants so they can close.
“After a thorough analysis of our corporately owned locations as well as a shift in the overall business strategy, the company made the difficult but necessary decision to close underperforming restaurants,” the company said in a statement to the Indianapolis Business Journal.
The company credited cannibalization from its own Carmel location as hurting the Downtown unit. The original location was “no longer viable and profitable enough to maintain” due to a shift in area demographics. Waco was troubled from a previous “criminal incident that has impacted its business significantly more than we anticipated.” The struggles of these four restaurants led to Scotty’s falling behind on rents with certain landlords, the documents said.
The Downtown store owes $292,340 in back rent to Indianapolis-based Jefferson Plaza LLC, according to court papers.
In February, an announcement said Wise was joining Luke Family of Brands as vice president of restaurant operations. As part of his new responsibilities Wise would assist in opening a minimum of 10 Scotty’s Brewhouse locations in major Midwest college town markets.
This past June, the company announced the launch of a comprehensive national franchise program with ZGrowth Partners.