The All-American eatery known for making its employees wear colorful, characteristic hats is now filing for Chapter 11 bankruptcy after claiming that the leases at its many locations are too high. The Hot Dog on a Stick company is owned by HDOS Enterprises. The company claims that it has $1 million in debt and may have as much as $10 million in debt when all things are considered.
The court filing shows that the company currently estimates its assets at between $10 million and $50 million. The company's chief executive says that many mall-based businesses had to sign expenses leases during the booming economy of the mid-2000s. In addition, declining mall foot traffic over the past several years has had a negative impact on sales at some company locations. With the recession, less people chose to visit malls in general, instead choosing to save their finances for more important things. This leads to less frivolous spending, and leads to less sales at Hot Dog on a Stick.
The chain operates primarily in malls in the western United States and has about 93 locations. The company was founded in Santa Monica in 1946, and sells flavored lemonades, battered hot dogs on sticks and cheese on sticks. While the snacks are delicious, they are not considered healthy by any standards, and a current health food and organic eating craze in America may have also contributed to fewer sales by the company.
The business is not pursuing new leases in other locations and wants to renegotiate some of the expensive leases acquired in the early 2000s with landlords currently seeking compensation for the costs. The company will operate as usual during bankruptcy proceedings, and does not intend to shut down its food-court services.
The case was filed in the U.S. Bankruptcy Court's Central District of California in Los Angeles. HDOS Enterprises says that the Hot Dog on a Stick brand has been so strong and iconic for so many years that they are not worried about the downfall of the company. Instead, the HDOS Enterprises CEO claims that the bankruptcy will help the company to emerge in a position to thrive well into the future. The eatery chain currently operates on an employee stock ownership plan.
Chapter 11 bankruptcies are typically reserved for companies that want to file for a bankruptcy in the U.S. While individuals can also file for a chapter 11, it is most commonly used to assist organized corporations or sole proprietorships. This bankruptcy filing allows the debtor to maintain control of a business operation as a debtor in possession. This means that the debtor's businesses are subject to the oversight and jurisdiction of the courts. Normally, businesses can remain in operation, which helps to accumulate funds while creditors are legally barred from collecting funds.
Normally, the courts will assist a Chapter 11 business in organizing debts so that they can be funneled into a feasible payment plan. A trustee is typically allowed to operate the debtor's business, and the debtor will act as this trustee. The Chapter 11 allows the debtor in possession to work towards financing or loans or to reject and cancel contracts that are financially damaging. Debtors are protected from other litigation against the business through the imposition of automatic stay during the bankruptcy.
This means that creditors cannot sue the company for debts until they emerge from bankruptcy. If the businesses debts exceed its assets, then the bankruptcy may involve a restructuring that will result in selling the company to the creditors. In most situations, this can be avoided. If you want more information about Chapter 11 bankruptcies or believe that this form of bankruptcy could help you to restructure your business, call the firm today!