Rising Delivery Costs Drives Houlihan’s Restaurant To Chapter 11

The private-equity backed operator of Houlihan’s restaurant chain has filed for bankruptcy protection.

York Capital Management and Mike Archer, a former president of Applebee’s and TGI Fridays, bought Houlihan’s in 2015 and now blames the chapter 11 filing on a number of factors, including expensive leases, a tight labor market and “the rapid growth in costly third-party delivery.”

Documents filed in U.S. Bankruptcy Court show that Houlihan’s has almost $80 million in assets and $76.9 million of liabilities, which is mostly debt. The company has 47 restaurants in 14 states, as well as more than 20 Houlihan’s outlets owned by franchisees. The chain employs around 3,450 salaried and part-time workers.

There is already a deal in place to sell Houlihan’s to restaurant operator Landry’s for $40 million, as well as the assumption of some liabilities, according to The Wall Street Journal on Thursday (Nov. 14). Landry’s owns Bubba Gump Shrimp Co., Morton’s The Steakhouse, Joe’s Crab Shack and other casual dining chains. In August, Landry’s made an offer to acquire the assets of Restaurants Unlimited, which filed for bankruptcy in July, blaming a recent minimum wage hike in court filings.

“Over the past three years, the company’s profitability has been significantly impacted by progressive wage laws along the Pacific Coast that have increased the minimum wage,” Chief Restructuring Officer David Bagley said at the time. “As a large employer in the Seattle metro market, for instance, the company was one of the first in the market to be forced to institute wage hikes.”

As for Houlihan’s, it has secured a $5 million bankruptcy loan, and filed standard motions to keep paying wages, utilities and other expenses until the sale is approved. The bankruptcy and pending acquisition are not expected to impact business at the eateries.

“We expect the process to be seamless for our guests, team members and vendors and look forward to continuing to provide our guests with the same great experience they expect when they dine with us,” Archer said, according to published reports.