The fast food industry has been taking a beating for the last couple of years, and the latest to take a hit is Eegee’s, an Arizona-based chain of sandwich shops. Just recently, Eegee’s announced it had filed Chapter 11 bankruptcy, which promptly closed several locations. A decision like this really epitomizes the problems many restaurant chains face today in the post-pandemic economy.
Background on Eegee’s
Eegee’s was founded in 1971 in Tucson, Arizona, and over the years has gathered quite the loyal following. It’s a chain that specializes in sub sandwiches-traditional subs, chicken, fries, and those frozen drinks called “Eegees.” In 2018, private equity firm 39 North Capital took ownership of Eegee’s, hoping to grow the brand and optimize its operations. Despite that, financial pressures have taken a big hit on the chain.
Reasons for bankruptcy filing
Eegee filed bankruptcy on December 6, 2024, for various reasons cited as causes for its misery. The company showed an extreme decline in footfall since COVID-19, which severely affected the revenue. Sales plunged 4.8% in 2023 from the prior year, according to court documents. Fixed costs related to rent and debt did not budge.
Furthermore, it was fueled by wider economic headwinds such as:
- Rising labor costs
- Inflation of Food and Shipping costs
- General reduction in the total amount that people were prepared to spend to dine out
All this came to a head as a liquidity crisis which led directly to the bankruptcy protection for the firm filing against in order for it to restructure, both its debt as well as its operations.
Immediate impact: Store closures
Eegee’s have announced its restructuring to include an immediate closure of the five following locations;
- 6810 East Tanque Verde, Tucson
- 502 West Ajo Way, Tucson
- 7760 East Speedway Blvd., Tucson
- 1530 West Grant, Tucson
- 3514 West Peoria Avenue, Phoenix
One commissary supporting all of the foregoing locations will also be closed. Eegee’s currently supports about 25 locations in the state of Arizona. According to CEO Chris Westcott, these store closures are necessary to continue the legacy and viability for the future of the company.
Financial overview
In its bankruptcy filing, Eegee’s estimated its assets and liabilities total between $10 million and $50 million. It estimated owing a total of $3.1 million to unsecured creditors, such as landlords and suppliers. The chain was also in litigation with Sysco over more than $1.2 million in unpaid bills.
This will let Eegee restructure its debt while it continues operations in other remaining locations via the bankruptcy process. The company wants to “stabilize finances and look for options for the sale of assets through structured processes”.
A broader context of restaurant bankruptcies
It stands not alone in these misfortunes but joins the expanding list of restaurant chains that have filed bankruptcy in 2024. Among the already leading names are TGI Fridays and Red Lobster. Lower sales and higher costs of operation have pushed the businesses into these unfortunate conditions. Truly, the fast food segment has witnessed closures attributed to the altered consumer pattern of consumption behavior in the post-pandemic scenario.
Both of these factors, inflation increasing food and labor costs, causing an inability for many chains to stay profitable, and dining out becoming discretionary spending, mean chains have seen huge declines.
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