Business

Bennigan's Restaurants Shut Down Nationwide

Independent Franchise Locations Remain Open

CHICAGO (CBS) ― Customers showing up for lunch at Bennigan's restaurants in Chicago and across the country found quite a surprise Tuesday morning, when all the corporate-owned locations had signs on display reading "closed for business."

Bennigan's Grill and Tavern closed all of its corporate-owned locations nationwide after filing for bankruptcy. That amounts to 160 locations, and about 10,000 employees are out of work. Independent franchises remain open for business as usual.

Chicago and the suburbs will be hit hard. Fifteen Bennigan's in the area did not open for business for Tuesday, now that the company is being liquidated in bankruptcy court. 

 What do you think of the Bennigan's shutdown? Send us your comments.

Some managers and some employees say they were called in the middle of the night. People got the calls at the stores, others were called at 1:00 in the morning at their homes. No one expected it.

Displaced employees wiped away tears outside the Bennigan's restaurant in Calumet City. They are among the thousands who lost their jobs when the restaurants closed.

"For them to tell us we don't have a job or anything, that's a hurtful thing, especially if you have kids," said former employee Tina Beacham.

The corporate-owned locations comprise about half the entire chain. The two locations in downtown Chicago, at 225 N. Michigan Ave. and 150 S. Michigan Ave., are both among them, and the doors to both were locked Tuesday morning.

Inside, neon signs remained lit, but the "closed for business" signs shooed passersby away. Managers said the mass-shutdown went into effect at midnight Monday night, and there was no warning.

Managers of Bennigan's location in Calumet City, and locations in Miami, Dallas and New Jersey also all confirmed to CBS 2 and our sister stations that their restaurants had shut down.

Bennigan's spokeswoman Leah Templeton said Bennigan's and Steak & Ale restaurants – both of which are owned by Plano, Texas-based Metromedia Restaurant Group – have filed for bankruptcy, along with the holding company S&A Restaurant Corp.

But not all stores that use the Bennigan's and Steak & Ale names have filed for Chapter 7 bankruptcy, Templeton said in a statement. Franchise locations are not named as debtors in the bankruptcy filing and thus are not affected, she said.

The statement said a trustee would determine "future decisions regarding the affairs of the debtor companies."

CBS 2 Legal Analyst Irv Miller explains that Chapter 7 bankruptcy means the company is being liquidated, as opposed to Chapter 11 bankruptcy, in which a company tries to reorganize and remain in business.

Miller said a Chapter 7 filing usually means a company has "major league debt," and it is unlikely that employees would get their last paycheck. He said someone could conceivably buy the assets and reopen the full Bennigan's chain, but that would only be after a long, drawn out court process.

The bankruptcy filing does not affect other two restaurant chains owned by Metromedia, Ponderosa and Bonanza Steakhouse, Templeton said in the statement.

One of the Bennigan's restaurants on Michigan Avenue is located a stone's throw from Millennium Park and the Cultural Center, the other across the street from the Art Institute. Both were popular with downtown diners, who were astounded by the development.

"I am really shocked, because there was no indication that anything was wrong," regular customer Donna Wimes said outside the North Michigan Avenue location. "The food was good; they always seemed to generate a crowd."

"We average going out about once a month to Bennigan's, and then occasionally, some of my friends from work and I would come here," said Edna Sherwood. "So they had reasonable prices and good food, so it's definitely a surprise."

Some of the Chicago area restaurants were busy. In fact, managers say the Michigan Avenue restaurants, as well as the one in Calumet, were doing very well. But experts say sales were soft around the country, and the economy was the biggest problems.

"When consumers are squeezed, they don't have the money to eat out that they did before," said food industry consultant Ron Paul with Technomic, Inc.

Paul also criticizes Bennigan's for opening too many restaurants. He says other chains have made the same mistake. Between 2002 and 2007 the top 20 chains grew more than 7 percent per year, when demand was only 2 percent. That spells more bad news for more restaurants.

"We're going to have to see more units closed, because they're not going to get the traffic to justify the rent and pay the other expenses," Paul warned.

Given the state of the economy, customer Bob Perkins said such mass-shutdowns as these are to be expected.

"The cost of food is just too high, and it's all related, with gas prices and the economy itself," Perkins said. "Until somebody takes a stand and does something, you're going to keep seeing this."

One young woman showed up at the North Michigan Avenue Bennigan's for her very first day of work Tuesday morning, only to find the restaurant closed. She declined to be interviewed.

Alphonso Prince, manager of the Bennigan's at 1250 Torrence Ave. in Calumet City, said he was notified of the shutdown at 12:10 a.m. from his area director, who was crying on the telephone. He said there was no forewarning about the shutdown.

"I'm angry," Prince said. "I'm hurt; I'm devastated."

"No blast of e-mails, nothing to say, 'Sorry, we just can't do it anymore,'" Prince continued, "just a phone call from my area director who doesn't know anything, because she just found out. She'd been with the company for 21 years."

Prince called Bennigan's shutdown "totally unprofessional."

He said he contacted his staff around 1 a.m., and many thought the news was a practical joke. He also had to tell a newly hired employee she could not come to work.

Franchise Locations Remain Open
But franchise-owned restaurants said they remained open for business as usual, according to a published report in the Times Of Northwest Indiana.

Franchise owner Larry Briski told the newspaper his locations at the Railcats Stadium in Gary, Ind., and in Highland, Hobart, Elkhart, and Angola, Ind., were all open for business as usual. The newspaper reported that the franchise operators knew about the corporate-owned closures.

There is also a franchise location in Elgin, Ill., but the vast majority of Chicago area locations are corporate-owned, and thus, have closed.

The Wall Street Journal reported recently that the Metromedia Restaurant Group violated several terms of a lending agreement with GE Capital Solutions. The company prepared a bankruptcy filing, the newspaper reported.

Bennigan's was founded in 1976. The restaurant has locations in 32 states.

The Bennigan's Web site did not mention the closings Tuesday, and still advertised a Jameson barbecue menu and other special promotions.

CBS 2's Joanie Lum, Dorothy Tucker, Web Producer Adam Harrington, and WBBM Newsradio 780 contributed to this report.

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