Sizzler leaves bad taste in the public's mouth

Comment

June 16, 1996|By Mike Burns

CHALK UP ANOTHER example of cynical corporate manipulation of the law. Sizzler International locked without warning the doors on 136 of its family steakhouses, including one at Crossroad Square Shopping Center in Westminster, hours after a sneaky Sunday court filing for bankruptcy in California.

Employees arrived for work to find a "Sorry, closed" note taped to the door, after cleaning up the place as usual the previous night. No thanks, no notice, no service. Potential patrons got the same abrupt printed message, as Sizzler pulled the plug on all 25 outlets in the Baltimore-Washington area, fired 900 workers and stopped paying rent on these long-term restaurant leases.

Meanwhile, back in California corporate headquarters, the chain's chief executive was indulging in New Age-style obfuscation. "We're trying to get back to the essence of Sizzler," pronounced President Kevin Perkins, even as he announced plans to spend $150,000 each on new decor (Italian colors) and a new (hostess-seating, hand-held menus) format at the 85 establishments that remain open, mainly in the West.

The Westminster closing affects about 30 employees, nearly all of them part-time and most of them earning a bit more than minimum-wage. They will likely get their final pay, nothing more.

'No respect'

"It's common and it shows absolutely no respect for employees," Vivian Schmidt, a nine-year waitress at Crossroad Square, told a local reporter. That sums it up pretty well. It wasn't lavish wage and perks for busboys, waiters and grill cooks that were driving the 40-year-old company into the poorhouse.

In fact, the company isn't even close to going broke. Bankruptcy was a coldly calculated and strategic business decision.

Sizzler made profits of more than $6 million last year, in spite of a 12 percent drop in revenues. Its court filing showed assets of $272 million and $98 million in liabilities. That's almost $3 in hand for every dollar it allegedly owes.

The real reason that Sizzler petitioned for Chapter 11 bankruptcy protection was to break long-term leases at the 136 restaurants it closed. With payments stopped by the court, landlords will likely agree to settle for one year's rent on Sizzler leases, which run as long as 15 years. The company expects to emerge from court protection in six months, after shedding its debt.

"It's a very substantial benefit," bankruptcy attorney David Heiman told the Wall Street Journal. "This is not an unfamiliar pattern" for retailers trying to close unprofitable stores, he added. If a firm simply closes unprofitable outlets without filing for bankruptcy, it is liable for full lease payments.

This type of creative bankruptcy may be legal but it runs counter to what most people expect of the legal system. Bankruptcy law remains the last refuge of corporate scoundrels, encouraging surreptitious legal maneuvers and shortchanging creditors and workers.

There's no shame, no regret in Sizzler's decision. Bankruptcy is simply another tool to gain an advantage on the competition.

Sizzler isn't the worst offender, merely the latest to cynically twist the law. Manville Corp. dumped its egregious liabilities for asbestos deaths and injuries in bankruptcy, Dow Corning Corp. took the same tack this year on silicone breast implant claims. LTV Corp. shed labor contracts and other claims in bankruptcy protection, getting a leg up on the steelmaking competition.

There were many explanations for Sizzler's decision to downsize, in addition to ill-advised long leases on sites that had previously failed as restaurants.

Its niche between fast-food and table-service casual restaurants was an uncertain one. Quality and value slipped as it struggled to maintain price. More families looked elsewhere for good food at reasonable prices even if it cost more. The all-you-can-eat buffet formula drew the wrong type of customer. Crucial beverage sales lagged behind comparable establishments.

Perhaps Sizzler needed geographical concentration, or saw that similar chains in this region can do it better, even though most mid-priced family steak restaurants are struggling with lower revenues.

In fact, the chain revamped its menu a few years ago to reflect changing customer tastes, adding lighter foods and bigger salad bars. Units were redecorated in new pastel colors. It didn't need bankruptcy to do that.

Perverting bankruptcy law

No matter what the reasons, Sizzler demonstrated cynical regard for the laws, and callous disregard for its employees, in the flight to bankruptcy protection. It's another example of the way the federal bankruptcy code needs updating and overhaul to force stricter standards on businesses that use it to unfair advantage.

Carroll patrons of Sizzler will find an abundance of other eateries. Employees will find similar jobs with other local businesses, some of whom responded quickly to their publicized plight.

But the bad taste that Sizzler leaves in our mouths after departing has nothing to do with gristly steak or sandy lettuce.

Mike Burns is The Sun's editorial writer in Carroll County.

Pub Date: 6/16/96

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