Le Pain Quotidien's US arm files for bankruptcy, sold for $3M

Dive Brief:

Le Pain Quotidien’s U.S. arm filed for Chapter 11 bankruptcy on Wednesday and plans to sell itself to Aurify Brands, subject to court approval, according to Bloomberg. Aurify Brands, a franchising group, operates brands like Five Guys Burgers and Fries and Fields Good Chicken and Make Sandwich.
Aurify agreed to provide $3 million in bankruptcy financing and will assume certain debts.
Without the sale, the bakery chain would have to close all of its 98 U.S. locations. It will now be able to keep at least 35 locations and retain 1,000 jobs.

Dive Insight:

Le Pain was already considering bankruptcy prior to the pandemic and the sale was already in the works two weeks ago. But COVID-19 sealed its fate after it had to temporarily close all of its locations during the pandemic and fired all of its 2,000 employees.

But the $3 million sale is incredibly under-priced considering Le Pain’s U.S. operations had $153 million in sales in 2019 and $17 million in losses, according to Bloomberg. The chain, however, was facing complete liquidation and more than $100 million in debt, and the bankruptcy will allow the chain to continue with a clean slate.

It’s U.S. business isn't the only one in trouble, either. It sold its 26 units in the U.K., which was also on the verge of bankruptcy in April. Prior to the pandemic, its U.K. locations, many of which were on high street locations, faced declines in foot traffic and consumer spending.

The company previously considered closing some cafes in the U.S. and hired a real estate consultant a few months ago to look at its restaurants as part of a reorganization plan. Part of its problems occurred in 2018, when the chain replaced its CEO Vincent Herbert with Jerry Gamez, who previously worked at Walmart and Burger King. Under Gamez, staff was cut and menu options were reduced while debt was increased, according to The New York Post.

Given Aurify Brands’ restaurant experience and management of high-growth companies like Five Guys, Le Pain U.S.'s new direction could be a little brighter even if the unit count will be reduced.