Sbarro Inc. filed for chapter 11 bankruptcy protection on Monday, April 4th, joining a growing number of restaurant chains that have done the same, such as Uno Holdings, Claim Jumper Restaurants and the parent company of Charlie Brown’s Steakhouse., the “Nation’s Restaurant News” reported.  If approved by the bankruptcy court, the company would be able to cut its $486.6 million in debt by $195 million.  (By way of comparison, competitor Papa John’s, which has grown to three times the size of Sbarro, and is not in financial difficulty,  is carrying only $95 million of long term debt on its balance sheet)

Since the founding Sbarro family immigrated from Naples and opened their first Salumeria in Brooklyn in 1956, Sbarro has alternated between public and private ownership, going public in 1985, and then being taken private again by the Sbarro family in 1999, perhaps due to their dissatisfaction with the company’s sluggish stock price.

The “Wall Street Journal” reporteed that “much of the pizza chain’s troubles go back to debt taken on in 2007 to back a buyout by private -equity firm MidOcean Partners” while in fact, the Italian quick-service operator had been under-capitalized and over-leveraged ever since 1999.   As reported in Sbarro’s 10-k reports, the company’s ratio of earnings to fixed charges dropped from 4.1x in 1997, two years before the 1999 buyout, to 0.7x in 2001, two years after.

After its acquisition by MidOcean Partners in 2007, the company was walloped by the recent recession, as foot traffic at malls dropped off, while flour and cheese prices climbed.   Sbarro is the only restaurant company in MidOcean Partners’ portfolio, which includes Freshpet, LA Fitness, Bushnell (fans) and Isotoner.    Sbarro had indicated in an SEC filing in late 2010 that there was substantial doubt it would be able to continue as a “going concern.”

The Sbarro company website says, “there will be no impact on our ability to deliver the great food and excellent service our customer’s have come to expect.”  Since I had never eaten at a Sbarro, I stopped in to their location at 46th and 5th Avenue, to sample a slice of their tomato and onion pizza, and can truthfully report that it looks great, with lighting that would make Julie Taymor proud, but tastes just average, with an unexceptional bread-like crust, and uninteresting sauce and cheese.