What is Chapter 11 Bankruptcy, anyways?

We’re seeing more and more restaurants file for this form of bankruptcy, so we took a closer look at exactly what Chapter 11 means for restaurants.

What is Chapter 11 bankruptcy, anyway? And why are so many restaurants filing for it?

OK. And…what does that mean for restaurants, really? The short answer, so they can sell and get out.

Even before the recent NYC indoor dining shut down, COVID’s havok on the restaurant industry made brands pivot their businesses, a lot, and quickly. Add the damage on profits, and countless were left with nothing to do but file for bankruptcy.

The Chapter 11 bankruptcy in particular appeals to chain restaurants hoping to find a buyer and just get out. Likely because they were unable to pivot to a comparable takeout/delivery model. Chuck E. Cheese, Le Pain Quotidien, and NPC International (which oversees 1,200 Pizza Hut, 400 Wendy’s locations), and most recently, the viral vegan darling, By Chloe, among those who have recently filed for Chapter 11.

The case of By Chloe is…layered. Their achievements can’t be denied. They capitalized on the exponentially upward health food trend, and created a viral, colorful, and most importantly, Instagram-able brand that skyrocketed into the feeds of 20-somethings across the country.

Despite their undeniable success, By Chloe’s turbulent past and that pesky pandemic led them to Chapter 11. We can’t help but notice that the introduction of a corporate partner can force even a viral vegan superstar out of business – even without a pandemic, but we’ll save that for another article.