Upscale Restaurant Chain Goes Bust, Blaming ‘Progressive’ Wage Laws

(Bloomberg) -- Progressive wage policies helped force upscale eatery operator Restaurants Unlimited Inc. into bankruptcy, according to court documents filed Sunday.

The company, which operates 35 restaurants ranging from fine dining to “polished casual” eateries, including Henry’s Tavern, Stanford’s and Kincaid’s, filed for Chapter 11 protection in Delaware on Sunday. Minimum wage hikes, two disappointing restaurant openings and consumers shunning casual dining are to blame for the bankruptcy filing, Chief Restructuring Officer David Bagley said in court papers.

“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.

“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.

Higher Pay

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.

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. Chapter 11 bankruptcy allows a business to remain in operation while it reorganizes.

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 debtor-in-possession 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.

The case is RUI Holding Corp., 19-11509-KBO, U.S. Bankruptcy Court for the District of Delaware

To contact the reporter on this story: Jeremy Hill in New York at jhill273@bloomberg.net

To contact the editors responsible for this story: Rick Green at rgreen18@bloomberg.net, Adam Cataldo

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