SBARRO NEEDS TO CHANGE MORE THAN ITS BALANCE SHEET

 

WILL THE SECOND TIME BE THE CHARM FOR SBARRO AS IT FILES FOR BANKRUPTCY AGAIN?

 

I don't think so...

Sbarro claims that the reason for filing bankrutpcy is the unprecedented decline in mall traffic.  Okay, okay, granted, I go to the mall maybe once a year around the holidays, but, that is not the only reason for Sbarro's struggles. Sbarro's food is simply not good.   Even if I visited the mall frequently, I would not eat at Sbarros.  I do not believe that moving locations to the suburbs will be enough to save Sbarro.  There is a lot of competition for pizza: local chains, Pizza Hut, Dominos, Papa Johns, just to name a few.  I suggest that in order for Sbarro to be profitable in the future, it must change its recipes.  Take a lesson from my personal favorite, Dominos, admit that your pizza is subpar, and then change it.

 

Sbarro was started almost 60 years ago by a family from Naples, Italy who came all the way to the outskirts of New York City.  Sbarro is based in Long Island New York in an area called Melville.  It wasnt until 2007 that the company was aquired by a large investment firm called MidOcean Partners.  As the United States economy and consumer spending weakened, this investment firm worked hard to open new locations overseas.  Now Sbarro has over 800 locations around the world with half of these locations located outside of North America.

 

Sbarro first filed bankruptcy in April 2011 where it remained until November 2011.  Under the first bankruptcy, the company reported that it eliminated 70% of its debt.

 

Sbarro's second bankruptcy petition lists more than $500 million in both assets and liabilities.  Current CEO, David Karam, claims that it will emerge from this bankruptcy quickly while eliminating 80% of its debt.  

 

As I note the similariity between Sbarro's filings only 3 years apart, I feel confident in my conclusion that the balance sheet is only part of the problem, the bigger problem is with the pizza.

 


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