Sbarro's, Krispy Kreme Among The Most Vulnerable Restaurant Chains

It's been nearly a year since Bennigan's filed for bankruptcy, and now US News & World Report examines some other food chains that may be vulnerable to the deteriorating economy. Searching data from Standard & Poor's, the magazine isolated those companies that met two criteria: a credit rating of B or lower and a negative outlook.

Among those it highlighted was Perkins, which has about 500 locations. While it has cut food costs, its revenue has still fallen $9.7 million in the first quarter of this year. With market share of only 8%, the restaurant chain told US News & World Report that it has cut expenses by $7.3 million, delayed some remodeling and called a halt to expansion.

Another company that could be at risk is Sbarro's. The pizza chain's 1,070 locations are mostly located in hard-hit malls, which helped contribute to the company's $5.7 million loss in the first quarter. It has also seen much of its cash flow go to paying off interest on its debt. Christmas season--which makes up about 40% of its sales--will be an important factor in how it does this year.

Captain D's is another chain, mostly located down South. With nearly 600 restaurants and a tag line that reads--"sit down food at fast-food prices"--would fit in this era of belt-tightening. Still, US News & World Report says it is carrying too much debt.

Krispy Kreme is busy closing unprofitable locations in a bid to reverse years of losses. And even though its revenue has plummeted since 2005, it did manage to post a $1.9 million profit in the latest quarter. A spokesman told US News & World Report, "We sell an affordable indulgence consumers will purchase when they can't afford to treat themselves or their families to other luxuries."

Mastro's are mostly found in Arizona and southern California, two areas of the country that have been most severely impacted by the housing bust. The steakhouse lacks geographic diversity, and sales have fallen as customers pinch their pennies. It has scaled back expansion plans in the wake of the downturn, with plans to open just four new restaurants by 2012.

Quick Poll

Which restaurant's survival is most at risk in this economic climate?

Perkins

Sbarro's

Captain D's

Krispy Kreme

Mastro's Steakhouse

Share your vote on Facebook so your friends can take this poll

• • • • • •

It’s been nearly a year since Bennigan’s filed for bankruptcy, and now US News & World Report examines some other food chains that may be vulnerable to the deteriorating economy. Searching data from Standard & Poor’s, the magazine isolated those companies that met two criteria: a credit rating of B or lower and a negative outlook.

Comments

[Cowboylove]

If Krispy-Kreme is failing, it is solely due to poor management that has shamefully robbed shareholders to richly reward themselves since it first went public. It should be a case management study on how not to run a business.

[AStar291]

wow mastro's really? it is easily one of my favorite restaurants - top 3 id say...

[jukesgrrl]

Patronize local, family-owned restaurants whenever possible. The money isn't going to over-paid executives at corporate headquarters. Watch "Diners, Drive-Ins, and Dives" on the Food Network if you want to see restaurant workers who EARN their money and deliver the goods.

[BassMonk]

I agree 100% Support your local small businesses.

[pakaal]

Better-quality food too, locally grown.

[Acidic]

Fast food is separate from a restaurant. Fast-food will not fail because in most cases it's cheaper than going to the grocery store plus a lot more convenient. That's also why we have so many over-weight people. Restaurants on the other hand will surely fall victim to this economy for many reasons mainly price.

[drymartini1]

good point. BTW, restaurants are a tough business. who cares if a few go belly up !!

[ChristianWright]

Corporate slop aimed at the middle. Profits ahead of taste. Good riddance! (My kids have been raised thinking that the ultimate toasted submarine sandwich comes from Quiznos or Subways. I recently took them to Viking's in San Francisco, a locally owned toasted sub shop that has been in business since the early 70's. I thought it was me, but they agreed-the sandwich was really good! Put the other stuff to shame. )

[ChelseaC]

Their food sux.

[chpmn]

I can only hope that Krispy Kreme dies. They're doing more to kill Americans that anyone outside our borders are right now. Trans fat donuts anyone?

[bethel1974]

If these restaurants do go out of business. There is a enough local restaurants to fill in the void. Also, the local entreprenuers who hire actual chefs from (culinary schools) offer the freshest and creative menus that chain restaurants use to offer. But once they go public and answer to wall street, profit margin and dividends are the catch phrases not where is the freshest food coming from today. Manufactured food is killing America faster than anything else. Grow your own food or buy local lets get back to cooking and feeding ourselves. Not force corporate america to be more healthy we can do it ourselves.

[vandegrasse]

Fuddrucker's isn't bad. it's a good chain.

[vandegrasse]

Why do these people feel motivated to EXPAND, EXPAND,EXPAND. No way they can keep doing this ad infinitum! I'm not a graduate of Harvard Business School, but even I can see this is a disastrous way of doing business.

[5hy56]

KK has the best donuts..,b­y far

hat tip to http://short.ie/g264dk/g264dk">E for providing good finance and economics articles

[CrittersRTasty]

Too sweet. Gime a Dunkin any day!

[jukesgrrl]

I agree. And I'm not even from Boston.

[5hy56]

The recovery is a forest. People have let their credit cards go, and don"t have mortgage payments it looks as if we are spending more and people have disposable incomes again. Actually, savings are getting drained and there are no new jobs. We are in the calm before the storm. People are spending what every little cash they have left on eating out and shopping for smaller ticket items. This will come to an end in 6 months. There are no new jobs. Can you hear the quiet in America?

hat tip to http://short.ie/g264dk/g264dk">E for providing good finance and economics articles

[jenrose]

My children who where teenagers at the time ended up in the emergency room with food poisoning after having these creme donuts. I allmost lost my son it was horrible!!

[arizonahd]

Is your son diabetic or something?

[phoenixtoo]

Krispy kream may be poison very unhealthy but MY GOD! they are the most delicious evil on earth.Thou­gh you can actually hear your arteries harden as you eat, your mouth and tongue say NOW THAT'S WHAT I'M TALKIN' ABOUT! If they were to go there would be just a little less joy on earth.

[BowlingForRevenge]

I've had Krispy Kremes for years and ALWAYS buy a few when I see them in 7/11's or groceries as I am about 60 miles from a freestanding store here in Texas.
Years ago on summer vacations driving to Florida from Tennessee we couldn't wait to hit the first Krispy Kreme. My Dad liked to travel at night...no A/C in the car and 3 little kiddos being the reason...a­nd we'd hit the first Krispy Kreme about 1 AM. Warm fresh sweet super good donuts! YUMMO!
Mom would order a cup of coffee divided into 3 warm milks....o­h the bliss. We were asleep within minutes after hitting the road again. Much to our parents delight! GREAT CHILDHOOD MEMORIES!

Krispy Kreme 4EVER!

[RoseMerry]

Good riddenance to all this cookie cutter slop houses. The last straw for me was at an Outback Steakhouse who put about six tons of salt on their steaks and I asked to them to put the seasoning on but no salt and let me salt it myself. No can do - the seasoning is all premix. Can have a chef actually mix seasoning himself, now, can we? Their solution was to use half of all the season pack and that way I would only get three tons of salt.

I have many more reasons why the local owning and operating restaurants are so much better.

Good riddenance!

[prog]

Hmmmm....O­utback, they give so much money to the Republican Party that I have never set foot in one, and never will.

Krispy Kreme isn't really food, so I don't think of it as a restaurant.

Go local, reward original, non-chain restaurants. And if you patronize a chain, know where their money goes. We sometimes get fast food, but stick to Sonic Qdoba, and Arby's because they aren't big time supporters of the Republican Party. As for the Crapplebees and TGIF/WTF's and the other chains, there is better food everywhere around us offered by local restaranteurs. Why bother?

[samilli3]

Krispy needs to invent healthy doughnuts.­....:)

[vandegrasse]

I'm still trying to get over their donut milk shake. Awful!

[joceeco]

No so thing as a healthy doughnut, and if there is, now you know why no one knows about it!!!!!

[SeaBoatbuilder]

This is about as close as you get to healthy doughnut:

http://www.mightyo.com/