Inside Bennigan's Bankruptcy Filing

If you've got a craving for a Bennigan's Monte Cristo—the restaurant chain's battered and fried ham, turkey and cheese sandwich, which is dusted with powdered sugar and served with raspberry dipping sauce—then you might be out of luck. This week, the parent company of the 32-year-old faux Irish bar and grill filed for Chapter 7 bankruptcy protection. While the firm's 138 franchisee-owned outlets will remain open, 150 of the company-owned eateries will close.

Bennigan's is a casualty of the weak economy and, like many of its patrons, had trouble dealing with higher fuel, food and labor costs. But operating costs were not the only issues. Industry experts also blame an outdated menu, poor food quality, slow service, poor site selection and facilities in need of upgrades. "It's never just one thing, is it?" says Ron Gorodesky, a consultant for Paoli, Pa.-based Restaurant Advisory Services. "If you're already not doing terribly well, and your revenues take a 10 percent hit, and your food costs go up 15 to 20 percent, it has a tremendous impact on your bottom line." Attorneys for the privately held Metromedia Restaurant Group of Plano, Texas, which owns Bennigan's, declined to comment for this story.

The chain's high-calorie, fat-laden menu almost certainly didn't help. Signature dishes like fried buffalo wings, fried broccoli, fried steak and a dessert named Death by Chocolate all seem out of step in these health-conscious times. An October 2007 National Restaurant Association consumer survey found that 76 percent of U.S. adults were trying to eat more healthily at restaurants than they did two years earlier. "I do think of Bennigan's as dated," says Pam Murtaugh, a Madison, Wis.-based strategic consultant who specializes in food. "It's a watering hole, with bar food," she says. "That's the kind of stuff that goes first."

Meanwhile, the chain's competition evolved with consumers' changing tastes. Among the sector's biggest gainers is The Olive Garden, whose "Garden Fare low-fat entrees" and slogan, "When you're here, you're family," apparently resonated with diners. The result: sales at Olive Garden were up 10 percent from 2007 to 2008 to $3.07 billion, a figure that propelled its parent company, Darden Restaurants, to a better than expected fourth quarter, up 25 percent from the year before.

Diners may simply not have felt connected enough to Bennigan's. "It's just one more place to eat," says Bill Marvin, a.k.a. the Restaurant Doctor, author of "Restaurant Basics" and "There's Got to be an Easier Way to Run a Business." "The thing that's been missing in the hospitality business is hospitality." Restaurants whose business is up in this economy "provide a heartfelt experience that somebody [there] gives a damn," says Marvin. "It's about being a real honest place for hospitality, where people really care and you feel well served." Too often diners leave restaurants and feel they wasted their time. "I got fed, but I can take care of hunger with a Snicker's bar," says Marvin. "If I'm going to go out when money is tight for me, I'm not going to go someplace where I get abused."

Despite the brand's challenges, Bennigan's franchisees say they're committed to staying open. "We have considerable investment in Bennigan's, and Bennigan's is a 30-year-old name that has a lot of recognition in the marketplace," says Brad Hansen, CEO of LaBelle Management, which owns 14 Michigan Bennigan's franchises. "Everyone has too much invested just to quit … [and] it's not all doom and gloom." The parent company, unlike franchise owners, "was probably overleveraged," he says. "It's a matter of the times we're in—rising food costs, rising labor costs, declining sales. You still have to make the rent payments." While franchise owners' commitment is admirable, they've got their work cut out for them. "It's hard to get the corporate stink off your franchise restaurant," says consultant Gorodesky.

To succeed, Bennigan's owners will need to win over diners like Velma Dominguez of Harlingen, Texas. "I remember Bennigan's as being kind of plain. They never updated," says Dominguez, who, along with her pediatrician husband, Roland, and their four kids, prefers the local Olive Garden, with its bread sticks, salad and "awesome" desserts. Bennigan's, she says, "Just doesn't seem like a special place."

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