HomeTown Buffet, affiliated dining chains file for bankruptcy

WILMINGTON, Del. (Reuters) - The owner of HomeTown Buffet and other buffet dining chains filed on Monday for Chapter 11 bankruptcy, blaming a lawsuit that was not disclosed when its current owner bought the businesses in August.

Buffets LLC, an affiliate of Food Management Partners, in August paid an undisclosed amount for the chains Old Country Buffet, Ryan’s, Fire Mountain and Tahoe Joe’s, in addition to HomeTown, according to Food Management Partners’ website.

Those chains, which operate 150 restaurants, were part of the bankruptcy filing on Monday, according to court documents.

The firm that sold the restaurant chains in August did not disclose a pending lawsuit, which resulted in an $11.4 million judgment, according to a statement from Peter Donbavand of San Antonio, Texas-based Food Management Partners.

He also said the chains have experienced sharp drops in sales that he considered unusual. The statement did not say who sold the businesses to Food Management Partners, and a spokeswoman would only say it was “private equity.”

The company said sales have fallen 22 percent short of the seller’s projections, prompting the closure of 74 stores in recent weeks and another 92 in the next 10 days.

Buffets LLC and the chains do business under the Ovation Brands name.

It was the third filing since 2008 years for the restaurant chains, which previously entered bankruptcy known as Buffets Inc.

The chains listed assets worth up to $50 million and liabilities of up to $100 million, according to documents filed in the U.S. Bankruptcy Court for the Western District of Texas.

Buffets Inc and the Ryan Restaurant Group merged in 2006 to create the largest U.S. buffet chain.

In early 2008, however, the company filed for Chapter 11 bankruptcy to shed some of its 626 locations and cut its debt by $700 million.

The company returned to bankruptcy in 2012, this time to slim its reach from 494 restaurants.

Reporting by Tom Hals in Wilmington, Delaware; Editing by Chizu Nomiyama and Nick Zieminski