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NY AG James in Spotlight & Restaurant Chain Bankruptcies · Bloomberg Law

• 0:02
  Speaker 1: This is Bloomberg Law with June Grosso from Bloomberg Radio.
• 0:09
  Speaker 2: I don't really spend a lot of time focused on
• 0:12
  Speaker 2: this campaign of retribution. I've got a lot of work
• 0:17
  Speaker 2: on my hands, standing up and defending the rights of
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  Speaker 2: New Yorkers, protecting them from harms coming from Washington, D.C.
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  Speaker 3: As New York's attorney general since 2019, Letitia James has
• 0:29
  Speaker 3: taken on many powerful targets, But it may be her
• 0:33
  Speaker 3: suit against Donald Trump and the Trump Organization for fraud
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  Speaker 3: that brought her firmly into the national spotlight as the
• 0:41
  Speaker 3: two traded barbs during a trial that resulted in a
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  Speaker 3: nearly $ 500 million penalty. Now James is back in the
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  Speaker 3: national spotlight after the governor of New York appointed her
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  Speaker 3: a week ago to be a special prosecutor in the
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  Speaker 3: Cornell University sexual assault investigation.
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  Speaker 2: We will review the facts, gather evidence, interview witnesses, and
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  Speaker 2: if warranted, pursue prosecutions.
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  Speaker 3: There's already controversy as one of the accused men has
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  Speaker 3: filed a petition in court to have James removed from
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  Speaker 3: the investigation, alleging that her public statements call her independence
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  Speaker 3: into question. Joining me is Bloomberg legal reporter Eric Larson. Eric,
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  Speaker 3: so explain why Letitia James is back in the national spotlight.
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  Speaker 4: She is back in the national spotlight because New York's
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  Speaker 4: governor appointed her as a special prosecutor in a really
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  Speaker 4: high-profile rape case at Cornell University that has really captured
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  Speaker 4: national attention. And this is because the governor essentially lost
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  Speaker 4: faith in the local DA after the alleged victim in
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  Speaker 4: this gang rape at a fraternity at Cornell was filed
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  Speaker 4: a civil suit that brought some allegations to light that
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  Speaker 4: allegedly the local DA had failed to look into properly.
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  Speaker 4: And as a result, the governor has appointed James. Special
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  Speaker 4: counsel is kind of an unusual step to take. It
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  Speaker 4: shows that the state is pretty serious about it. And obviously,
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  Speaker 4: this is a very contentious issue that now the attorney
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  Speaker 4: general is going to be dealing with for a while.
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  Speaker 3: Is it unusual? I mean, the attorney general of a
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  Speaker 3: state handles civil matters, not criminal matters. He or she's
• 2:32
  Speaker 3: investigating whether to prosecute people.
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  Speaker 4: Well, actually, the New York attorney general does have some
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  Speaker 4: criminal authority. There's a criminal division. It is more common
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  Speaker 4: for the attorney general to handle civil cases.
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  Speaker 5: That's mostly what she is in the news for.
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  Speaker 4: The criminal cases are more local, gun crimes and things
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  Speaker 4: like that, if they.
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  Speaker 5: Involve state law.
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  Speaker 4: So her office does handle some criminal cases. But this
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  Speaker 4: is different because in this case, she's a special prosecutor.
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  Speaker 4: So it's not like the typical criminal cases that her
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  Speaker 4: office might handle.
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  Speaker 3: One of the accused men filed a petition today to
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  Speaker 3: remove James as special prosecutor in the Cornell case, saying
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  Speaker 3: she unequivocally demonstrated a bias and presumption of guilt against
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  Speaker 3: the defendants. And this stems from her social media post
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  Speaker 3: before she was appointed. She said, quote, what this young
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  Speaker 3: woman has been forced to endure is horrific and unacceptable.
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  Speaker 3: I'm holding her in my heart and in my prayers
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  Speaker 3: to her and to all survivors. You're not alone. We
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  Speaker 3: stand with you. So there are accusations of bias because
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  Speaker 3: she made that statement.
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  Speaker 5: That's right.
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  Speaker 4: That was before she was appointed. Of course, President Trump
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  Speaker 4: was one of the people who pounced on that statement.
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  Speaker 4: said that he did not think that the accused, the
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  Speaker 4: seven men accused in this case, will get a, quote,
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  Speaker 4: fair shake because she's looking at it. The president said
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  Speaker 4: he feels bad for them. And others have made similar remarks.
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  Speaker 4: Of course, Trump has clashed in court with Letitia James's office,
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  Speaker 4: and he's made similar claims against her that she was
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  Speaker 4: singling him out and prejudged him in her big civil
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  Speaker 4: fraud case that she successfully brought against him and his company.
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  Speaker 4: But other people are jumping on that statement as well.
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  Speaker 4: She responded saying that she is going to, you know,
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  Speaker 4: follow the facts and the evidence and the law. And,
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  Speaker 4: you know, spoken with, you know, one of her close allies,
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  Speaker 4: the Connecticut Attorney General William Tong, for example, said that
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  Speaker 4: he didn't think that it was terribly unusual for the
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  Speaker 4: Attorney General to make a comment like that. after these
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  Speaker 4: allegations were made and that people expect a prosecutor to
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  Speaker 4: be aggressive like this. Of course, she hasn't made any
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  Speaker 4: decisions yet. It's possible that they won't be charged with anything.
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  Speaker 4: The investigation is in its early stages. We'll see if
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  Speaker 4: these allegations of bias result in any significant setbacks for
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  Speaker 4: the case.
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  Speaker 3: I mean, this isn't the first time she's overseen an
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  Speaker 3: investigation like this. She oversaw the allegations of sexual harassment
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  Speaker 3: against former Governor Andrew Cuomo.
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  Speaker 2: Right.
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  Speaker 4: And in that case, she wasn't a special prosecutor. She
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  Speaker 4: issued a report. She did an investigation to sort of
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  Speaker 4: get to the bottom of the allegations that were made
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  Speaker 4: against Cuomo.
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  Speaker 5: She issued a really long report. It's very detailed.
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  Speaker 4: It ultimately led to Cuomo resigning, although he continues to
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  Speaker 4: deny any wrongdoing.
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  Speaker 3: And also, none of the local prosecutors, I think there
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  Speaker 3: were four, ended up bringing charges against Cuomo over those allegations.
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  Speaker 3: As you mentioned, there were accusations, there are continuing accusations
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  Speaker 3: against her by Trump. One of the reasons is that
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  Speaker 3: when she was campaigning, she promised to investigate him. She
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  Speaker 3: won the court case. And then when Trump returned to
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  Speaker 3: the White House, the investigations against her for mortgage fraud began.
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  Speaker 4: So, well, first of all, Trump raised those concerns during
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  Speaker 4: the case against him. And a judge looked into his
• 6:21
  Speaker 4: claims of political animus and claiming that he was being
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  Speaker 4: targeted based on those campaign comments that she made when
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  Speaker 4: she was running for attorney general. And a judge looked
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  Speaker 4: into them in detail and concluded that Regardless of what
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  Speaker 4: she had said, the evidence showed that her office had
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  Speaker 4: a legitimate reason for opening the civil fraud investigation and
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  Speaker 4: ultimately filing the lawsuit.
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  Speaker 5: And that was upheld on appeal.
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  Speaker 4: So we know that even though she made those comments,
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  Speaker 4: they didn't really result in anything helping him out in
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  Speaker 4: court because the idea is that she was able to
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  Speaker 4: show that there was evidence to justify the investigation being opened.
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  Speaker 4: So she claims that the Justice Department's investigation into her
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  Speaker 4: after Trump took office was a weaponization of the government
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  Speaker 4: against her and that it was retaliation for her case.
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  Speaker 4: That case was dismissed. A judge ruled that Trump had
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  Speaker 4: appointed the U.S. attorney who brought the case, had appointed
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  Speaker 4: that U.S. attorney improperly, and a grand jury declined to
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  Speaker 4: re-indict her. So that case really fizzled and is one
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  Speaker 4: of Many cases, of course, in which individuals have claimed
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  Speaker 4: that Trump is weaponizing the government against them.
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  Speaker 3: So during the Trump administration, there's been this coalition of
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  Speaker 3: Democratic state attorneys general. bringing cases against Trump. And I
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  Speaker 3: was interested, she told you, this is a time when
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  Speaker 3: you've got to push back. You have to litigate, legislate, agitate. Oftentimes,
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  Speaker 3: New York and California AGs are leaders in those coalitions.
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  Speaker 3: Has she been acting as a leader pushing things?
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  Speaker 2: Yes.
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  Speaker 4: We sat down with Attorney General James over the summer
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  Speaker 4: and had an interview with her in which she really
• 8:07
  Speaker 4: opened up about her record and what motivates her and
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  Speaker 4: And she really has spent a lot of energy, as
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  Speaker 4: have a lot of other state Democratic AGs, challenging various
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  Speaker 4: Trump administration policies in court. They've really banded together really
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  Speaker 4: since Trump's first term to become more organized to fight
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  Speaker 4: these policies. And in the second term, especially in light
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  Speaker 4: of the so-called Project 2025, where Trump supporters really signaled
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  Speaker 4: what their plans were for broad and sweeping changes of
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  Speaker 4: American society. So they really have been quite organized. They
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  Speaker 4: file a lot of joint lawsuits. California and New York
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  Speaker 4: are the most well-funded and biggest offices. They frequently lead
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  Speaker 4: lawsuits or co-lead them.
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  Speaker 5: Other states also sometimes lead them.
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  Speaker 4: But she is widely seen as a sort of de
• 8:55
  Speaker 4: facto leader of this group of Democratic AGs. And that's
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  Speaker 4: according to the president of the Democratic Attorneys General's Association,
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  Speaker 4: who we also interviewed, and.
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  Speaker 5: Other AGs who see her that way as a leader
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  Speaker 5: who organizes.
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  Speaker 3: Was there anything that she said in the interview that
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  Speaker 3: surprised you? She's been in New York politics for, what,
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  Speaker 3: 25 years? I wonder if there's anything surprising left.
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  Speaker 4: Yeah, you know, she did give some strong comments. You know,
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  Speaker 4: not all of them made them into our story. But
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  Speaker 4: I asked her, for example, about the fact that she
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  Speaker 4: was the first Black woman to be elected to statewide
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  Speaker 4: office and how that is still highlighted on her website
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  Speaker 4: at a time when the federal government and Trump were
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  Speaker 4: sort of attacking things like that. not wanting those sort
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  Speaker 4: of distinctions to be made, saying they're improper, they don't matter. And,
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  Speaker 4: you know, she told us that, you know, she has
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  Speaker 4: a grandniece who's eight or so who asked her what
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  Speaker 4: slavery was recently and that she, you know, had to
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  Speaker 4: sort of explain to her what it was.
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  Speaker 5: And the girl, you know, understood that it was because
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  Speaker 5: of the color. of her skin.
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  Speaker 4: And Tish James says that she told her, you know,
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  Speaker 4: that's why you have to know your history and fight
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  Speaker 4: for yourself.
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  Speaker 3: So now she's up for reelection a third time. I mean,
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  Speaker 3: she's going to sail through, it seems like, right? Has
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  Speaker 3: she ever had a close race for AG?
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  Speaker 4: She's won comfortably every time. The first time with 62%
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  Speaker 4: of the vote. She's widely expected to win this time.
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  Speaker 5: Around as well.
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  Speaker 4: She has been in New York politics, as you said,
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  Speaker 4: for a long time. She's garnered a lot of support
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  Speaker 4: in the city of New York and in the States.
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  Speaker 4: She's been representing different groups in New York for a
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  Speaker 4: long time. She was on city council for a decade.
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  Speaker 4: She was also the elected public advocate for New York City,
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  Speaker 4: the second highest elected official in New York City.
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  Speaker 5: That allowed her to sue the city, actually.
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  Speaker 4: It's a position that can allow the city to be
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  Speaker 4: sued on behalf of residents, which she did for very
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  Speaker 4: different groups. You know, children in foster care, challenging the
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  Speaker 4: way the city was treated. them, disabled kids, the way
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  Speaker 4: that they were transported on buses that didn't have air conditioning,
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  Speaker 4: you know, all kinds of things like that. So the
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  Speaker 4: way she sees it, she's been fighting for these New
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  Speaker 4: Yorkers for a long time.
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  Speaker 3: And that's... Does she have any plans for what she's
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  Speaker 3: going to target in her third term?
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  Speaker 4: Not too surprisingly, she said that she's going to continue
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  Speaker 4: to challenge the Trump administration. She expects that we'll continue
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  Speaker 4: to see policies come out of the White House that
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  Speaker 4: they will argue are unconstitutional. And they have a lot
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  Speaker 4: of concerns about what could happen in terms of voting
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  Speaker 4: rights and the environment pretty much across the board, as
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  Speaker 4: we've already seen, they expect these fights to continue. She's
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  Speaker 4: also increasingly focusing on big tech, AI, antitrust. So we
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  Speaker 4: can expect to see a lot more of that.
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  Speaker 3: Thanks so much, Eric. It's a great profile of James.
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  Speaker 3: That's Bloomberg Legal Reporter Eric Larson. Coming up next, have
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  Speaker 3: you noticed a lot of restaurant chains are shrinking and
• 12:09
  Speaker 3: others are out and out filing for bankruptcy? I'm June Grosso,
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  Speaker 3: and you're listening to Bloomberg. Have you noticed that a
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  Speaker 3: lot of restaurant chains are shrinking? Wendy's, Pizza Hut, Red Lobster,
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  Speaker 3: TGI Fridays, Papa John's, Outback Steakhouse, the list goes on
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  Speaker 3: and on. They're closing locations or planning to. It's been
• 12:33
  Speaker 3: a challenging time for restaurant chains, with the rising costs
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  Speaker 3: of rent, labor, and food products on the one hand,
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  Speaker 3: and more consumers unwilling to spend money on dining out
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  Speaker 3: on the other. While several chains have announced plans to
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  Speaker 3: close locations, others have filed for bankruptcy. Joining me is
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  Speaker 3: James Menton, Jr., partner and chair of the Restructuring and
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  Speaker 3: Bankruptcy Group at Robbins Kaplan. So tell us what you've
• 13:00
  Speaker 3: seen as far as popular restaurant chains filing for bankruptcy.
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  Speaker 1: Yeah, what I've seen is there's more of it happening
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  Speaker 1: given the economics the way it is. I think the
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  Speaker 1: most recent example would be True Food Kitchen, which filed
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  Speaker 1: on October 4th in Texas. And the reason they filed,
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  Speaker 1: they had come up with a couple of reasons for that.
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  Speaker 6: In terms of internally what was going on.
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  Speaker 1: But they had a liquidity problem and they couldn't resolve
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  Speaker 1: those issues in kind of an orderly wind down.
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  Speaker 6: And so what they did is they ended up filing.
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  Speaker 1: And what they're looking to do is essentially restructure things
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  Speaker 1: in a period of about six months. What they're looking
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  Speaker 1: to do is potentially sell their assets in what's called
• 13:40
  Speaker 1: a 363 sale. And if that doesn't work, which is
• 13:43
  Speaker 1: a much more timely, more expeditious manner in which you
• 13:47
  Speaker 1: dispose of assets and that requires court approval. Alternatively, they're
• 13:51
  Speaker 1: potentially seeking to have those assets sold in the context
• 13:55
  Speaker 1: of a plan, which is a much kind of longer
• 13:56
  Speaker 1: process and requires credit or approval and all of that.
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  Speaker 1: The third option, if that isn't gaining any traction or
• 14:02
  Speaker 1: interest among people out there, investors, is they're looking for
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  Speaker 1: an investor to come in to be a plan sponsor,
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  Speaker 1: to essentially take the equity of the debtor or of
• 14:10
  Speaker 1: the reorganized debtor and basically kind of go forward. So
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  Speaker 1: I don't think that True Food Kitchen is unique. And
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  Speaker 1: I think we have seen more of it in the
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  Speaker 1: last couple of years, given COVID and among other liquidity issues.
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  Speaker 6: Village Inn is another. It's a longstanding diner chain in Florida.
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  Speaker 1: And I've noticed that a lot of franchisees have now
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  Speaker 1: filed bankruptcy and dealing with increased business expenses. And they're
• 14:32
  Speaker 1: trying to pass on the cost, as they all do,
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  Speaker 1: to consumers. And given this particular environment economically, there's a
• 14:40
  Speaker 1: lot going on in terms of gas prices and whatever.
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  Speaker 6: And so if you're raising prices at restaurants.
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  Speaker 1: It may cause consumers to be less inclined to go
• 14:48
  Speaker 1: out as much as they did in the past. And
• 14:50
  Speaker 1: when that happens, that means you don't have as much
• 14:52
  Speaker 1: in the way of sales. And then that affects kind
• 14:55
  Speaker 1: of what revenues you have going forward. And that affects
• 14:58
  Speaker 1: your ability to pay whatever debt structure you have.
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  Speaker 6: So those are some of the things that I've been seeing.
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  Speaker 3: Is it harder for franchisees because they can't raise prices
• 15:07
  Speaker 3: as they'd like to? They have to stay within certain parameters.
• 15:12
  Speaker 1: I think that's right. So they have certain kind of
• 15:13
  Speaker 1: limitations as to what they can do. working with the
• 15:16
  Speaker 1: overall structure, and sometimes it doesn't quite work. And so
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  Speaker 1: that inhibits them in terms of what options they have
• 15:22
  Speaker 1: available to them. And sometimes the bankruptcy just becomes the
• 15:26
  Speaker 1: only option in terms of being able to essentially monetize
• 15:30
  Speaker 1: things rather than just go chapter 11, which I've been
• 15:32
  Speaker 1: kind of talking about chapter 11, which is kind of reorganization.
• 15:35
  Speaker 1: The other option potentially is to go chapter 7, but
• 15:37
  Speaker 1: that's more of a fire sale kind of concept, and
• 15:39
  Speaker 1: you're just liquidating everything. And so you kind of lose...
• 15:42
  Speaker 1: potentially going concern value and whatever. And so franchisees are
• 15:45
  Speaker 1: in a particularly tough spot.
• 15:47
  Speaker 4: Yeah.
• 15:48
  Speaker 3: I was going to ask you whether most of these
• 15:50
  Speaker 3: that you've seen with the restaurant chains are Chapter 11
• 15:54
  Speaker 3: reorganization or liquidation.
• 15:58
  Speaker 1: I've seen more Chapter 11 stuff, but that also requires
• 16:02
  Speaker 1: for a Chapter 11 case, you really need to have
• 16:03
  Speaker 1: a brand, right?
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  Speaker 6: And a brand that kind of works. You may need
• 16:06
  Speaker 6: to tweak it. You may need to restructure your debt
• 16:08
  Speaker 6: to maybe pare back stores or whatever.
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  Speaker 1: But what you need is an appetite for someone to
• 16:13
  Speaker 1: invest because you need dip financing, right? And so no matter,
• 16:16
  Speaker 1: sometimes you have these pre-packed plans where it's all kind
• 16:19
  Speaker 1: of set up and you have a sponsor essentially before
• 16:21
  Speaker 1: you file the Chapter 11. But in the absence of that,
• 16:24
  Speaker 1: you do need someone to come in who's willing to
• 16:26
  Speaker 1: fund that whole process. So for instance, in the True
• 16:28
  Speaker 1: Food Kitchen case, they have $ 20 million of dip financing
• 16:32
  Speaker 1: to help through this process. And there are milestones in
• 16:35
  Speaker 1: terms of that funding, in terms of how the case progresses.
• 16:39
  Speaker 1: So they're moving expeditiously through that.
• 16:42
  Speaker 3: The economy is what it is. You said there are
• 16:44
  Speaker 3: rising costs of rent, labor, food, and then people not
• 16:48
  Speaker 3: wanting to go out because of the rising costs. So
• 16:52
  Speaker 3: is it harder to find somebody who wants to invest?
• 16:55
  Speaker 1: Yes and no. Again, it depends on the brand. It
• 16:57
  Speaker 1: depends on kind of what's the growth model or what's
• 16:59
  Speaker 1: the plan kind of going forward coming out of that.
• 17:01
  Speaker 1: And so you can have in bankruptcy, it can kind
• 17:04
  Speaker 1: of put a pause on that. So in other words,
• 17:05
  Speaker 1: you can use that as an opportunity to kind of
• 17:08
  Speaker 1: restructure your debt. If you have contracts that are problematic
• 17:12
  Speaker 1: or that are causing a financial burden, you can deal
• 17:15
  Speaker 1: with them in the context of a bankruptcy.
• 17:17
  Speaker 6: You can pair back stores. In other words, if you've.
• 17:20
  Speaker 1: Got 500 stores, then in the context of bankruptcy, maybe
• 17:24
  Speaker 1: you pair that back. So for instance, in the context
• 17:27
  Speaker 1: of the True Food Kitchen case, as part of doing
• 17:30
  Speaker 1: the bankruptcy, they closed 12 locations. And so it's a
• 17:33
  Speaker 1: way of kind of pairing things back and streamlining things
• 17:35
  Speaker 1: a little bit and getting operations under control. So if
• 17:38
  Speaker 1: those kinds of things look positive, there's certainly money to
• 17:42
  Speaker 1: be made. It's a tough industry, right? And you're dealing with,
• 17:45
  Speaker 1: you know, intense competition. You're dealing with different consumer preferences
• 17:48
  Speaker 1: and whatever. But there's still, I think, opportunities, you know,
• 17:51
  Speaker 1: for the right brand, for the right company, you know,
• 17:53
  Speaker 1: kind of on a going forward basis, if you can
• 17:56
  Speaker 1: do those kinds of restructuring things in the context.
• 17:58
  Speaker 6: Of a bankruptcy.
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  Speaker 3: How often do you see Chapter 11s, you know, where
• 18:03
  Speaker 3: it results in company coming out of bankruptcy and how
• 18:08
  Speaker 3: often do they go into liquidation? I mean, I know
• 18:12
  Speaker 3: you don't have exact numbers, but is it more often
• 18:14
  Speaker 3: that the Chapter 11s are successful?
• 18:17
  Speaker 6: Yeah, that's my sense.
• 18:18
  Speaker 1: For the most part, they are successful with kind of
• 18:21
  Speaker 1: the pare down, what you're able to do in the
• 18:22
  Speaker 1: context of the bankruptcy. And it's also the case that
• 18:26
  Speaker 1: in a bankruptcy, we deal with a lot of Companies,
• 18:29
  Speaker 1: sometimes they sell them off to different constituents. In other words,
• 18:32
  Speaker 1: you're not selling everything to one person. And so it
• 18:34
  Speaker 1: really kind of depends on the economy, depends on the regions.
• 18:37
  Speaker 1: But I'd say for the most part, my sense is
• 18:38
  Speaker 1: things do end up being successful.
• 18:41
  Speaker 3: What are some of the factors that lead to bankruptcy,
• 18:45
  Speaker 3: some of the causes in the restaurant industry?
• 18:48
  Speaker 1: Sometimes there's financial mismanagement. In other words, you may have
• 18:51
  Speaker 1: cash flow issues or problems. You may have high operating
• 18:54
  Speaker 1: costs or excessive debt burden. You may have poor accounting
• 18:58
  Speaker 1: practices that could kind of impact or provide the groundwork
• 19:03
  Speaker 1: to cause some issues or challenges that need to be addressed.
• 19:06
  Speaker 1: The bankruptcy may be in response to that. You're also
• 19:08
  Speaker 1: dealing with kind of, generally speaking, external market forces that
• 19:11
  Speaker 1: I've alluded to. Again, you've got this intense competition. You
• 19:14
  Speaker 1: have shifting consumer preferences we've talked about, all kinds of
• 19:18
  Speaker 1: economic factors that play in that we've talked about. You
• 19:21
  Speaker 1: have rising operational costs that can include labor, food ingredients,
• 19:27
  Speaker 1: supply chain, rent, utilities, tightening of the margins and whatnot.
• 19:32
  Speaker 1: And then you've got just internal operational challenges. In other words,
• 19:36
  Speaker 1: location selection. Are you in the right place? Some locations
• 19:40
  Speaker 1: may be very, very good, but others may not be.
• 19:43
  Speaker 1: There may not be the kind of foot or driving
• 19:46
  Speaker 1: traffic that you anticipated, or maybe the demographics have changed.
• 19:50
  Speaker 1: such that those are no longer kind of desirable places
• 19:53
  Speaker 1: to be, or it's not really kind of profitable. And
• 19:55
  Speaker 1: what do you do about that? You also have quality
• 19:59
  Speaker 1: control issues, right? So that could potentially impact the experience
• 20:02
  Speaker 1: that you have. And then you've got this concept of adaptability.
• 20:06
  Speaker 1: How able is the particular company able to adapt to,
• 20:10
  Speaker 1: you know, consumer preferences and technology and desires for this
• 20:17
  Speaker 1: or that? You know, and some of this is coming
• 20:19
  Speaker 1: from other external factors like, you know, COVID or hurricanes
• 20:22
  Speaker 1: in Florida that certainly impact or cause financial damage.
• 20:25
  Speaker 6: Distress. True Food Kitchen will argue or they have.
• 20:28
  Speaker 1: Said that COVID caused a problem because, you know, everyone
• 20:31
  Speaker 1: was closed and they ghosted some kitchens and then they
• 20:34
  Speaker 1: had this kind of delivery only service, you know, in
• 20:37
  Speaker 1: one location. And so that impacts the consumer experience. So
• 20:40
  Speaker 1: there's many factors that can play in, you know, for
• 20:43
  Speaker 1: the restaurant business generally, which is very tough to begin with.
• 20:46
  Speaker 6: Right. And all of these factors play.
• 20:48
  Speaker 1: In on or can impact the options going forward in
• 20:51
  Speaker 1: how to address these things. Like many other industries, what
• 20:55
  Speaker 1: True Food did and others do is they, before they
• 20:57
  Speaker 1: file bankruptcy, they try to work it out, right? They
• 20:59
  Speaker 1: try to restructure their debt. They try to come up
• 21:02
  Speaker 1: with some strategies that work. And a lot of times
• 21:05
  Speaker 1: it doesn't. In other words, they'll bring in financial advisors.
• 21:07
  Speaker 1: They'll bring in M & A folks to market it
• 21:11
  Speaker 1: to see kind of what that's like. And if they're
• 21:13
  Speaker 1: getting some interest, but not the kind of interest that
• 21:16
  Speaker 1: they think they need or want, then they can use
• 21:18
  Speaker 1: the bankruptcy as a process to kind of move forward
• 21:21
  Speaker 1: with that. And also the bankruptcy, if there's litigation, a
• 21:24
  Speaker 1: lot of times that if they're running into liquidity issues,
• 21:27
  Speaker 1: maybe they're not paying the vendors. You know, there's lawsuits
• 21:29
  Speaker 1: that are out there. And so the bankruptcy allows that
• 21:32
  Speaker 1: to get halted.
• 21:33
  Speaker 6: Right.
• 21:33
  Speaker 1: There's an automatic stay in place. And so the litigation stops.
• 21:37
  Speaker 1: And so that provides a breathing room. So it's kind
• 21:40
  Speaker 1: of complex. It's all the reasons as to what each
• 21:42
  Speaker 1: particular restaurant is chain or franchise is facing. what the
• 21:47
  Speaker 1: options are and whether bankruptcy makes sense. And for many,
• 21:51
  Speaker 1: obviously it does, but it's not an inexpensive proposition, as
• 21:54
  Speaker 1: I've indicated.
• 21:55
  Speaker 3: People say that having a restaurant is one of the
• 21:57
  Speaker 3: toughest businesses to make a go of. I know in
• 22:01
  Speaker 3: New York City, you see restaurants opening and closing all
• 22:04
  Speaker 3: the time. Is it any tougher for chains?
• 22:08
  Speaker 1: One thing is I read a statistic where in terms
• 22:09
  Speaker 1: of restaurants, in terms of the competitiveness, I read a
• 22:12
  Speaker 1: statistic that said something like 30% of new restaurants failed
• 22:15
  Speaker 1: in the first year. But putting that aside, to go
• 22:17
  Speaker 1: to your chain issue, it really kind of potentially could
• 22:20
  Speaker 1: depend on the growth model and the growth strategy, right,
• 22:23
  Speaker 1: in terms of chains and whether they're successful or not.
• 22:25
  Speaker 1: Do they grow too quickly? Or in the True Food Kitchen,
• 22:28
  Speaker 1: they talked about they had significant management turnover. So that
• 22:32
  Speaker 1: kind of affected, you know, their expansion strategy and their
• 22:36
  Speaker 1: capital investments. And did they go down paths of investment
• 22:39
  Speaker 1: that maybe were kind of off-brand or that didn't really
• 22:42
  Speaker 1: kind of pan out? So in terms of chains, you
• 22:45
  Speaker 1: can have issues about growth and what does that growth
• 22:47
  Speaker 1: look like and how can you stay the course? And
• 22:50
  Speaker 1: sometimes things just don't work out, right?
• 22:51
  Speaker 6: I mean, just because of the economics.
• 22:53
  Speaker 1: So notwithstanding all of the best planning that you can
• 22:55
  Speaker 1: do and all the financing you may have, sometimes, as
• 22:58
  Speaker 1: I said, these other factors we talked about create some
• 23:00
  Speaker 1: challenges that sometimes bankruptcy becomes the only legitimate or reasonable solution.
• 23:07
  Speaker 3: Sad but true. But as you said, Chapter 11 gives
• 23:10
  Speaker 3: you a chance to turn things around. Thanks so much
• 23:13
  Speaker 3: for joining me. That's James Menton, Jr., chair of the
• 23:17
  Speaker 3: Restructuring and Bankruptcy Group at Robbins Kaplan. And that's it
• 23:22
  Speaker 3: for this edition of the Bloomberg Law Show. Remember, you
• 23:24
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• 23:27
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• 23:31
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• 23:37
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• 23:40
  Speaker 3: Wall Street time. I'm June Grosso, and you're listening to Bloomberg.