HopCat files for Bankruptcy Protection

We can expect a lot of this in days to come for the hospitality industry. The status of the Detroit location at Woodward and Alexandrine is not clear in the article cited below. It always seemed to me it was packed and hopefully that bodes well for its survival. My guess is that due to their statewide expansion they were over-leveraged and didn't have the legs to stand on when the pandemic hit.

A major Michigan restaurant owner has filed for bankruptcy protection and warned that the state can expect “a giant wave of bankruptcies” in the hospitality industry in the near future, despite this week getting a green light to partially reopen next Monday as part of the state's recovery plan from the COVID-19 pandemic.

Mark Sellers, founder of BarFly Ventures, which owns eight Michigan HopCat restaurants, told the House Regulatory Reform Committee on Wednesday that his company's revenues are down 100% and “we're essentially barely able to keep the lights on.”

BarFly Ventures, which owns eight Michigan HopCat restaurants, has filed bankruptcy.HopCat was evicted from its Royal Oak location and is in default to its landlords at its other locations, Sellers said.
https://freep-mi.newsmemory.com?publ...bedd57_13436c0

Every company's situation is different but for so many of the restaurants that are incorporated it will make sense to just fold up and re-open under a different name. There will be so much available rest. equipment on the market you can probably by back your stuff for 25 cents on the dollar.

It would be interesting [[at least to me) to know what debt they have [[other than the mountain of unpaid rent we already know about.) I believe that they spent a fortune on build-out to open these places so there's probably bank debt.

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Originally Posted by brandon48202

I believe that they spent a fortune on build-out to open these places so there's probably bank debt.

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The rule of thumb is that you need at least two years of capitalization to run a new restaurant. That is, you aren't going to make any profit for two years, it's all debt servicing and payments. It can also take about that long to "dial in" a new restaurant - figure out what to make, how much stuff to buy, how to staff, how to market, etc... This is why franchises are so popular - most of that stuff is figured out for you. In Hoptcat's case, it's probably a capitalization problem. They expanded into relatively expensive markets [[downtown areas) pretty quickly. I think they will bounce back. Their Royal Oak location was always packed, at least.

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Originally Posted by JBMcB

The rule of thumb is that you need at least two years of capitalization to run a new restaurant. That is, you aren't going to make any profit for two years, it's all debt servicing and payments. It can also take about that long to "dial in" a new restaurant - figure out what to make, how much stuff to buy, how to staff, how to market, etc... This is why franchises are so popular - most of that stuff is figured out for you. In Hoptcat's case, it's probably a capitalization problem. They expanded into relatively expensive markets [[downtown areas) pretty quickly. I think they will bounce back. Their Royal Oak location was always packed, at least.

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I agree. At minimum, they will be back under new ownership. They have a good brand and that alone has a great deal of value.

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Originally Posted by brandon48202

It would be interesting [[at least to me) to know what debt they have [[other than the mountain of unpaid rent we already know about.) I believe that they spent a fortune on build-out to open these places so there's probably bank debt.

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They did a major debt-financed expansion into new markets that turned into a bust well before COVID hit.

https://www.mlive.com/news/grand-rap...ankruptcy.html

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Sellers said his company financed the expansion through debt, so it could grow more quickly, rather than relying on “cash flow.” He said the strategy was working fine until some HopCat locations, primarily Chicago, Port St. Lucie and Chicago, started losing money. Those locations have since closed.

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So they went from 17 locations to 14, but they still had to pay on the loans they took out for those three closed locations.

Blame COVID-19.

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Originally Posted by 401don

Every company's situation is different but for so many of the restaurants that are incorporated it will make sense to just fold up and re-open under a different name. There will be so much available rest. equipment on the market you can probably by back your stuff for 25 cents on the dollar.

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You can buy it at 25 cents on the dollar and ship it to me for 40 cents on the dollar,quick flip,no Chinese junk though,which dominates the market.:cool:

Usually the chains get their equipment financing that allows them to write it off the first couple of years.

I am getting double of what I was before the shut downs,because as many that will not make it are being replaced by people looking to get into business,it’s a continuous cycle.

Depends on what they are filing chapter 7 or 13.

Not sure why the picked Port St Lucie let alone craft beer where they are like 7-11s craft beer was a fad and like tacos you do not survive in the restaurant business on fads,many lost their dreams on opening up a cupcake place.

How many wake up everyday with a urge to go buy a cupcake,let alone how many you have to sell just to pay the light bill.

I help set up lots of restaurants,the ones that survive are the ones that have good staple food at a fair price,if you want to do a fad,start it,peak it out for two years and dump it off on the next sucker who will be the ones losing.

No fad survives more then 4 years.

Look at Hooters,no fancy chefs,throw some wings in the fryer and they continue to make bank.

$100 k liquid and one can get a A&W franchise anymore.