A massive franchisee now files an unexpected bankruptcy after listing both assets and liabilities at between $1 million and $10 million.
A large Subway franchisee out of San Antonio that last year lost a $3 million wrongful death lawsuit filed for Chapter 11 bankruptcy protection late last week.
River Subs LLC, which operates 48 restaurants in Texas, is seeking to reorganize under Chapter 11 bankruptcy.
The company listed both assets and liabilities at between $1 million and $10 million, according to court documents, but did not explain a reason for the filing.
Yet its largest debt is over a wrongful death lawsuit filed by the family of Marisela Cadena, a 43-year-old manager with the franchisee was shot and killed by her ex-boyfriend outside one of the shops.
The franchise was founded in 1991 by a trio of operators, Martha Jordan, Cathy Amato and Rick Riley. Riley retired in 2021.
The company said in court documents that it “has continuously employed a majority of minority and low-income team members and developed them into future leaders for Subway.”
The company said 90% of its management started as entry-level workers, which Subway calls “sandwich artists.”
Amato and Jordan have served on various Subway franchisee associations and advertising boards.
By 2012, River Subs peaked at 69 restaurants. But the company since then closed 21 of those locations, due to a combination of “restaurant saturation as well as the COVID pandemic.”
The company generated less than $30 million in sales last year and employs 454 workers, according to court documents.
Subway itself has struggled with store closures for years, starting in 2015, amid weak per-unit sales and high costs.
The company has closed about 7,000 restaurants over the past nine years.
It remains the most prolific restaurant chain in the U.S., with some 20,000 locations, reports Restaurant Business.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
An essential company now files a surprising bankruptcy after miscalculating demand for its inventory after the Covid-19 pandemic.
Supply Source Enterprises, a leading provider of branded and private label cleaning products and personal protective equipment, on May 21 filed for Chapter 11 protection to seek a sale of its assets.
Supply Source brands include The Safety Zone and Impact Products.
The Guilford, Connecticut debtor listed $50 million to $100 million in assets in its petition and $180 million in funded debt, which includes $80 million owed on a term loan credit facility, $60 million owed on an asset-based loan, and about $40 million in unsecured debt.
Before the Covid-19 pandemic, which generated huge demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with stable single-digit growth, according to a declaration from the debtor’s Chief Restructuring Officer Thomas Studebaker.
Once the pandemic hit in 2020, the debtor had substantial growth due to high demand for safety, hygiene and sanitation products
The debtor reported adjusted Ebitda of $93 million in 2020 which was nearly a 300% increase over the previous year.
However, the company’s financial performance deteriorated in subsequent years.
Based on the unprecedented demand in 2020, the company commissioned an industry study in early 2021 that concluded that the Covid-19 pandemic would fundamentally change the cleaning supplies and protective equipment industry and market for its products.
The study also estimated that the company’s Covid-related growth would likely be sustained through 2024.
In contemplation of continued customer demand at elevated prices, based on the study’s data, the debtor increased purchases of inventory even though the costs were higher due to supply chain constraints during the pandemic.
Despite the study’s assurance that growth would be sustained for years, the pandemic’s positive effect on the market faded by the end of 2021 and demand for PPE decreased to normal rates, reports TheStreet.
The reduction in demand led to large amounts of excess inventory that the company could not sell in the same quantities and prices.
The excess inventory forced the debtor to secure additional storage space, which increased storage costs.
These factors tightened the company’s liquidity and led to a decline in annual revenue in 2023 by 26% from 2022, resulting in a negative 2023 Ebitda of $13 million.
The debtor’s liquidity issues led to it being overdrawn on its asset-based loan facility by $30 million.
The ABL lender in February 2024 swept the debtor’s bank accounts, further impacting the company’s financial distress.
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Also Read: This Massive Mall Retailer Is Now Closing In California
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