Sbarro Leaves Bankruptcy Behind with Less Debt and a New Plan

After filing for Chapter 11 bankruptcy for the second time earlier this year, the popular pizza chain shop has taken on a brand new role thanks to a team of investors. The company exited business bankruptcy in June and unveiled a new business model that could potentially revamp the brand completely.

Detailing the Deal that Helped Sbarro Avoid Declaring Bankruptcy

Sbarro rolled out a new team of owners and exchanged its $150 million debt for equity in order to map out its new business plans. Private equity firms Apollo Global, Babson Capital and Guggenheim Investment all came together to help reinvent the pizza chain.

Along with that came plans to move Sbarro’s headquarters from Long Island to Columbus, Ohio to be closer to its new Pizza Cucinova business. And aside from about 40 jobs at the company’s old Long Island headquarters, its other 2,700 employees throughout the country were not affected. Reports outlined benefits like lower costs and more opportunity to completely reinvent what Sbarro means to the rest of the country.

A New Twist on an Old Dish

The new Sbarro team announced intentions of changing the way pizza is created and consumed in chain restaurants all over the globe, drawing from an already successful model. According to reports, Sbarro is moving towards a new concept in which personal pizzas are fired up in wood-fired ovens, ready-to-order and unique; Chipotle style.

Chipotle, another popular chain restaurant in the burrito-making business, allows customers to walk their own food items down an assembly line and have them made exactly to their liking. Sbarro’s plan comes from a similar place and includes hundreds of brand new American pizza shops ready to roll in the next several years.

Now, the company’s new Pizza Cucinova model allows Sbarro to slowly back away from its former niche of mall food court stands and low-budget chain pizza shops. New investment has paved the way for rebranding, restricting and reinvigorating the old business formerly known as Sbarro.

How Sbarro Survived

Sbarro, founded in Brooklyn in 1956, has had a turbulent past before its new team of investors got together to change the entire business. The pizza chain filed for bankruptcy protection twice in the last three years, announcing it would be closing over 150 of its restaurants in the United States back in February.

By choosing Chapter 11 bankruptcy, Sbarro allowed itself to essentially take a step back and reorganize the company. The filing showed the company was unable to take care of its mounting debt or pay its bills, but ownership did not need to completely give up all control of the business.

Sbarro thanked the support from its stakeholders and new investment team for helping to dig the pizza chain out of its hole.

“We want to thank our stakeholders for their steadfast support,” the company said in a statement. “The company can now move forward with its plans to invest in and grow the business. We will be announcing progress and further plans for the business in the near future.”

Lessons Learned

Small business owners better keep an eye on Sbarro, because it is showing off a model that other struggling businesses could mimic to avoid filing bankruptcy.

Sbarro clearly was no longer working in its former state as the go-to mall pizza shop. But instead of just rolling over and dying, those involved made the call to rebuild from the ground up, and the business—and dough—has been on the rise ever since.

There is no shame in admitting where things might not work and giving your business a fresh shot of new life. In Sbarro’s case, it came in the form of a completely new business model and consumer experience.

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This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.

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