Another business on the brink of insolvency files for bankruptcy protection, buying time as it tries to reinvent itself in a changing marketplace.
It’s a common occurrence, a business fact of life, until you or someone you know becomes a casualty of that calculated decision.
That’s the situation for hundreds of employees in our area and across New England after the parent company of Dedham-based Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches reached an agreement Monday to sell its fast-food chains and filed for Chapter 11 bankruptcy protection.
Wynnchurch Capital, private-equity firm brought in by Papa Gino’s management, reportedly has submitted a bid worth $20 million to acquire PGHC in bankruptcy.
This comes after PGHC Holdings, Inc., shocked employees and customers alike Sunday by abruptly closing 95 restaurants and laying off 1,100 workers without a public explanation.
Papa Gino’s closed restaurants in Fitchburg, Lowell, Westford, Bedford, Methuen and Nashua, N.H., while D’Angelo shuttered storefronts in Chelmsford, Westford, Bedford, Burlington, plus New Hampshire stores in Derry, Nashua, and Salem.
According to the company’s website, Papa Gino’s in Chelmsford, Tewksbury, Leominster, Gardner, Burlington and Derry, Hudson, and Salem, N.H., remain open, as do D’Angelo’s outlets in Fitchburg, Gardner and Leominster.
The company said while it regrets the closings, it was a necessary step toward addressing the company’s debt structure.
Unfortunately, talk is cheap, especially when more than a thousand loyal employees get blindsided by a business decision months in the making. While all of the reasons for this drastic step may be valid, none occurred overnight.
Two of the main factors centered on rising labor costs and increased competition. Chief financial officer Corey Wendland reportedly pointed to minimum-wage increases, combined with higher health-insurance expenses in the four states where Papa Gino’s operates.
The mandatory minimum in Massachusetts, now $11 an hour, will rise to $15 an hour over the next five years. The minimum wage in Connecticut rose from $9.60 to $10.10 in 2017. In Rhode Island the minimum wage will go from $10.10 to $10.50 next year.
Only New Hampshire, which follows the federal standard of $7.25, will have an easier time finding help now that so many fellow employees seek a fast-food job.
Remaining restaurants and the competition will absorb some of these displaced workers, but the majority — mostly part-timers — will have a tough time finding similar positions.
The bankruptcy filing will allow Papa Gino’s and its equity partner to remain operating while attempting to find a competitive business model.
We often demand transparency from government officials and other public institutions, but not of private companies that employ so many of our fellow citizens.
Papa Gino’s may survive, but the black eye its corporate image received from this callous act has taken a slice out of the company’s reputation.