Cerberus Capital Management-linked entities have acquired the assets of restaurant chain Garden Fresh Restaurant Corp. after a bankruptcy judge approved the transaction on Monday, paving the way for the company to exit Chapter 11.
“This challenging but necessary process has created a stronger financial foundation,” Garden Fresh chief executive John Morberg said in a statement. “Through our partnership with new owners, we plan to accelerate the guest-focused efforts we’ve been making to refresh our brands.”
Private equity firm Sun Capital had acquired Garden Fresh in 2005 from Centre Partners, with managing director M. Steven Liff at the time stating that he was “enthusiastic about the growth prospects of Garden Fresh” and later helping to expand into new markets.
Headquartered in San Diego, the soup and salad-focused restaurant chain currently has more than 100 restaurants across 11 states operated under the Souplantation and Sweet Tomatoes brands. But the company declared bankruptcy in October, reportedly due to declining sales and rising personnel costs.
Later that month, the company announced that it had entered into a restructuring agreement with its creditors that would see it closing between 20 and 30 under-performing stores. A Cerberus unit had been among the company’s lenders, which had extended a total of almost $175 million in debt to the company.
Rising labor costs and difficulties retaining labor are among the greatest concerns for restaurant operators across the country, Hudson Riehle, senior vice president for research at the National Restaurant Association, told Agri Investor.
Rising minimum wages and changes to overtime provisions have helped make labor recruitment and retention the top concern among respondents to his association’s annual survey of business concerns. He said the issue was not even among the top six concerns of respondents to the same survey just six years ago.
Riehle said that growth in average hourly earnings for non-supervisory restaurant workers over the past year has been 4.2 percent, the highest since 2007, compared with just 2.4 percent growth for the US private sector overall.
“There’s not a lot of maneuverability and room in most restaurant operating models to deal with rapidly-escalating labor costs,” he said.
Representatives for Cerberus and Sun Capital declined to comment.