Boston Chicken Files for Bankruptcy Protection
Five years after going public in one of the most frenzied stock offerings Wall Street has ever seen, Boston Chicken Inc. filed for Chapter 11 bankruptcy protection Monday and closed 178, or 16%, of its stores.
The restaurant chain said it sought U.S. Bankruptcy Court protection because of about $283 million in debt that comes due Oct. 17.
Boston Chicken and its Boston Market restaurants created a Wall Street sensation in 1993. Its initial public offering was priced at $20 per share and shot up to nearly $50. The stock split 2-for-1 in 1994.
The stock has since plummeted, closing at 50 cents Monday on Nasdaq.
Boston Chicken said 2,700 employees are being transferred to stores that will remain open. The company plans to leave 14 cities, where 500 hourly workers will be fired. It has 18,500 employees in total. The company closed all of its stores in Chico, Calif.; Louisville, Ky.; and Nashville and Memphis, Tenn., among others.
It did not appear that any Southern California stores would be closing, according to Boston West, a developer that operates 98 Boston Markets franchises in the region.
Boston Chicken has fallen on hard times in the last two years, as supermarkets and others began selling cheaper ready-to-eat roasted chickens. Weak sales and profit led to a cash crunch, forcing Boston Chicken to write off hundreds of millions of dollars in loans to franchisees who borrowed to expand the chain.
“They just expanded too quickly, and the concept just got dull,” said Neil Dorflinger, a director of DLS Capital Partners, who bet in the last six months that the stock would fall and who owns some of the company’s debt. “They won’t liquidate, but they are going to have to shrink a lot.”