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The past year has brought a wave of restaurant businesses filing for reorganization in Chapter 11. With inherently low profit margins, increased competition, limited pricing flexibility and a propensity for expansion without the support of underlying business fundamentals, the industry is particularly susceptible to business failure. The recent filings range from luxurious high-end restaurants to casual budget eateries, and often involve hundreds of locations, thousands of employees, and hundreds of millions of dollars of debt. This article discusses the causes of the recent trend, and some of the issues that arise when restaurants avail themselves of the Chapter 11 process.
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