Restaurants Unlimited, a longtime Seattle-based company with 35 upscale eateries including well-known names like Palomino, Cutters Crabhouse and Horatio’s, sought Chapter 11 protection Sunday and said minimum wage hikes were partly to blame.
In court papers filed Sunday in Delaware, Chief Restructuring Officer David Bagley also cited two disappointing restaurant openings and a trend of consumers shunning casual dining.
The company’s restaurants range from fine dining to “polished casual” eateries, among them multiple locations of Henry’s Tavern, Stanford’s and Kincaid’s. One of the most visible is the Stanford’s restaurant at Northgate Mall, a shopping center being prepped for a massive redevelopment.
“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,” Bagley said. “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.”
The company’s restaurants are concentrated in Washington, Oregon and California.
Restaurants Unlimited’s parent company, RUI Holdings, was sold by founder Rich Komen and others in 2006 to Sun Capital, a buyout fund specializing in turning around distressed companies. An affiliate of Sun still owns RUI, according to court papers.
The bankruptcy filing could prepare the company for a sale to new owners, assuming some quick temporary financing is found to keep the restaurants operating, documents indicate.
“We believe this path offers the greatest potential for stability and future growth,” the company said in an emailed statement. Multiple potential buyers have indicated interest in the company, and the sale process could be completed by Sept. 30, according to the statement.
Wage increases in Seattle, San Francisco and Portland boosted the company’s wage expenses by a total of $10.6 million through its fiscal year end 2019, Bagley said. Revenue for the year ended May 31 was $176 million, down 1% from the prior year.
A Seattle Times story at the time of RUI’s sale to Sun Capital said it posted sales of $143.5 million in 2006, with 29 restaurants in 12 states.
Restaurants Unlimited employs about 1,885 part-time workers and 168 full-time restaurant staff as well as 50 salaried employees at its headquarters in Seattle.
The company began trying to sell itself in late 2016, but failed to do so. It also tried to refinance its debt load, now standing at about $40 million, but failed there, too. It will now seek a sale through the bankruptcy process, Bagley said.
Restaurants Unlimited has arranged for a $10 million loan that will help it operate during bankruptcy, court documents show. The company has just $150,000 of cash on hand, hasn’t paid debt holders since January and is behind on some payments to landlords and vendors, Bagley said.
Seattle Times business staff contributed to this report.