Z’Tejas Southwestern Restaurant Files Chapter 11 Bankruptcy in Arizona

: Reese Baker & Associates

  Filed under: Chapter 11

While the Cornbread Ventures LP partnership is based in Houston, Texas their chain of South-Western inspired restaurants called Z’Tejas filed for chapter 11 bankruptcy in Phoenix Arizona this week. The owners hoped to turn the failing chain of nine restaurants around to profitability when they acquired them two years ago. Z’Tejas will be closing four of its stores this week, while keeping three locations in Arizona and two locations in Austin, Texas open for business as the company reorganizes under Chapter 11 bankruptcy protection.

Closing Stores Can be Good for Business

It’s not uncommon for companies with brick and mortar locations to shed under-performing stores while concentrating on more profitable locations during a Chapter 11 bankruptcy, and that is exactly what the owners of Z’Tejas have done with this recent bankruptcy filing. The company’s owners have even gone as far as claiming that the restaurant closures have already stabilized the company’s balance sheet and are setting the chain for smoother operations. Financial experts commented that the bankruptcy seems to be a smart move and has the potential to restructure the restaurant chain’s obligations in a manner that allows them to exit bankruptcy as a much stronger business.

Deals, Debt, and Jobs

According to the bankruptcy petition, filed in bankruptcy court in Arizona, the company owes creditors nearly $500,000, with the partnership owing another $1.7 million in private loans and lines of credit to JPMorgan Chase. Because of the bankruptcy, a British investment group has decided to walk away from talks revolving around purchasing the franchise. Furthermore, the company employees around 220 workers in both Arizona and Texas, with the majority of them being part time. While locals will have less places to eat and work, another Arizona based restaurant collective called LGO hospitality is looking to advance from Z’Tejas’ dismay by actively hiring any service professionals left without a job as a result of the store closings. LGO runs restaurant brands such as Ingo’s Tasty Food and Chelsea’s Kitchen.

Businesses filing Chapter 11 bankruptcy do so in order to remain in business (most of the time) and restructure the company’s debt at the same time. The Chapter 11 bankruptcy protection is meant to allow businesses the breathing room necessary to strengthen their financial position in order to stay operational. It seems from bankruptcy experts and financial pundits that Z’Tejas was a prime candidate to take advantage of bankruptcy laws in the U.S. meant to give individuals and organizations the opportunity at a fresh financial start.