Fast-food chain fights for survival after Chapter 11 bankruptcy

The chain just won a small court victory that at least enables it to keep its doors open for now.

Jun 24, 2024 - 23:30

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Fast-food chain fights for survival after Chapter 11 bankruptcy

Increasing costs, particularly higher rents and labor costs, have pushed a number of restaurant chains to the brink of closure.

Add in that many chains have carried additional debt due to losses they incurred during the Covid pandemic, and you have a situation that has forced many chains to fail.

In addition, cash-strapped consumers are demanding lower prices, which the big chains have provided. When McDonald's admits that consumers want more value and offers a $5 meal deal, that's tough for the competition to meet.

Even chains like Chipotle, which has typically said that it can raise prices and people will still pay, have faced a backlash. Social-media videos have claimed that the chain has been offering smaller portions at higher prices; the company has said it raised prices but denied that it reduced portions. And those video efforts have not worked: The chain's Q1 sales grew 14.1% and same-store sales rose 7%.

Still, even as Chipotle bucks the trend, consumers have been pushing for value and that's much harder for smaller chains to offer. McDonald's, Chipotle, Wendy's and other massive chains might take a profit hit due to increased labor costs, but they have massive buying power and can pull multiple levers to control expenses.

Smaller chains cannot do that and financial problems have pushed a smaller fast food/fast casual chain to the brink.

McDonald's recently introduced a $5 value meal that looks a lot like the Wendy's Biggie Bag.
Image source: Cate Gillon/Getty Images

Melt Bar and Grill has a bold mission

It's hard to classify Melt Bar and Grill. The chain has been built around grilled cheese, a classic comfort food that could be considered fast food, and craft beer, which is not traditionally sold in fast-food restaurants.

On its website, the chain itself admits that's it's hard to define.

"It’s an energetic and eclectic gourmet comfort food restaurant. It’s a relaxing neighborhood craft beer bar. It’s a genuinely all-inclusive gathering place that welcomes everyone: tats and suits, moms and rockers, locals and visitors. It’s a melting pot and meeting spot for all," the company posted.

The chain was created by Matt Fish, a Cleveland musician and chef who loves craft beer and grilled cheese sandwiches.

"Matt’s vision was to bring classic American dishes to the table in an unpretentious and fun way because everyone can relate to a grilled cheese sandwich," the chain said. "The answer to 'What is Melt?' isn’t just bread, cheese, craft beer, music and atmosphere, it’s the chemistry of it all — the way it comes together — that makes Melt unique. It’s a certain magic that can’t easily be explained, it must be experienced."

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That's a bold vision but it did not keep the chain from filing Chapter 11 bankruptcy on June 14. The company hopes to be able to reorganize its finances to survive and it recently won a small court victory that will keep it open for now.

Melt Bar and Grill gets a small bankruptcy win

“Navigating the restaurant industry in the postpandemic world with growing economic issues is becoming increasingly difficult,” Founder Fish said in a statement. “The world and the industry are rapidly changing around us. After careful consideration, Melt Bar and Grilled has decided to file Chapter 11 bankruptcy. This gives us the best opportunity to reorganize and rebuild the company."

At the time of its filing, in U.S. Bankruptcy Court for the Northern District of Ohio, Melt Bar and Grill disclosed that it had assets between $500,001 and $1 million with liabilities between $1 million and $10 million.

More bankruptcy:

Judge Alan M. Koschik, who is overseeing the bankruptcy, "granted an emergency order in the case on June 21, which will allow the chain to pay $100,000 in “wages, salaries and employee benefits” through a KeyBank payroll account, as well as reimburse employee business expenses from the pay period through June 14.

But the order also blocks Melt from paying “severance, vacation pay or bonuses” without additional action from the judge," NBC 4 Ohio reported.

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The order enables the chain to keep operating while it negotiates with its creditors.

Koschik scheduled a status conference in the bankruptcy case for Aug. 6. He gave all of Melt’s creditors, excluding government agencies, a deadline of Aug. 27 to file claims on Melt’s assets, according to the news website.