UPDATE: Bennigan's and Steak & Ale to file for bankruptcy protection

By LAUREN SHEPHERD, AP Business Writer

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By Beth Boehne

NEW YORK (AP) — Restaurant chains Bennigan's and Steak & Ale have filed for Chapter 7 bankruptcy protection and will shut their doors, less than two months after their parent company said it was not preparing to do so.

The companies filed for bankruptcy protection Tuesday in the Eastern District of Texas. Their parent company — privately held Metromedia Restaurant Group — is based in Plano, Texas.

In a Chapter 7 bankruptcy filing, a company seeks to liquidate its assets and shut down.

Employees at a Bennigan's in Plano were greeted by a sign Tuesday on the front door reading "WE ARE CLOSED. THANK YOU." Next door, a Steak & Ale sat empty in a deserted parking lot but there was no sign posted.

Neither Bennigan's nor the Metromedia Restaurant Group returned calls for comment. A lawyer listed in the filing, J. Michael Sutherland of Carrington, Coleman, Sloman & Blumenthal LLP, did not return a call.

According to a recorded message on the law firm's answering system, not all stores using the Bennigan's and Steak & Ale trade names have filed for bankruptcy and some franchise locations were not included in the filing.

The filing lists 38 separate entities that it classified as "debtors" but does not include a list of locations that are shutting down.

Locally, Steak & Ale is located at 52554 Indiana 933 in South Bend. Bennigan's has locations at 3011 Belvedere Road in Elkhart and 2521 E Center St. in Warsaw. Both Bennigan's locations told WSBT News that as franchises, they will remain open.

All restaurants have been struggling as consumers cut back on discretionary spending to better deal with high gas prices, the weak housing market and inflation. The hardest hit have been casual dining chains and bar and grill restaurants, which charge higher prices than fast food and other quick-service chains.

Bar and grill restaurants have also suffered from intense competition. Morningstar analyst John Owens said several chains expanded quickly, making it more difficult for customers to differentiate between them and forcing many companies to cut prices to lure diners.

"Bennigan's was the weakest of the major players," Owens said.

Meanwhile, commodity costs have soared, forcing chains to either raise menu prices or see profits plunge.

Credit has also been tight, making it difficult for companies to restructure their debt.

In June, Metromedia Restaurants said it was formulating a proposal to present to its lenders to restructure its debt, but said it was not preparing to file for bankruptcy.

In the filing, the company indicated that it has up to 49 creditors and owes less than $50,000. It said it will have no funds left after administrative expenses are paid to repay its creditors.

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