Garden Fresh Restaurant Corp., a San Diego-based company that owns and operates 123 Souplantation and Sweet Tomatoes restaurants in the U.S., filed Monday for Chapter 11 bankruptcy protection.

The filing comes after an unsuccessful attempt to sell the company, and is part of a corporate overhaul intended to eliminate millions of dollars of debt and return the business to profitability.

The reorganization also includes the shuttering of between 20 and 30 underperforming restaurants outside of Southern California, as well as a potential sale of the business to second lien holders.

Started in 1978, Garden Fresh originated as a single, San Diego Souplantation location and, in 1986, expanded to the broader Southern California region, which continues to remain the core of the business. In 1990, the company moved beyond its local roots with a Palm Harbor, Florida location under a separate brand name, Sweet Tomatoes.


Though currently a privately-held entity, Garden Fresh conducted an initial public offering in 1995 and exponentially grew its restaurant base before being taken private again in 2004. More recently, in 2012, Garden Fresh shook up its management team and replaced its then CEO and original founder, Michael Mack.

Now the company, with assets and liabilities both in the $1 million to $10 million range, finds itself at a difficult juncture.

In an affidavit released Monday, Garden Fresh CEO John Morberg blamed the business’ overall cash-flow problems on declining sales, cost increases, higher minimum wage requirements, more expensive employee benefit plans and rent hikes.

Several restaurants, including Fox & Hound, Cosi, and Logan’s Roadhouse, have also filed for bankruptcy in recent months.


For Garden Fresh, part of the problem is, that outside of Southern California and Florida hubs, the company has stores scattered across the nation.

“I see a whole bunch of states where they have three units here, and a few there. That’s sub-optimal,” said John Gordon, principal at Pacific Management Consulting Group and an expert on chain restaurant economics. “When you go into a new market and people don’t know you, they get to know you by having a good restaurant experience and then being able to see that you’re around.”

Going forward, the soup and salad company, Gordon said, would be best-served by focusing on its Southern California stores, which likely outperform other locations.

In Morberg’s affidavit he identified two distinct categories of restaurants: successful, “core” restaurants and money-losing, “non-core” locations. Tuesday, Garden Fresh received the court’s approval to close 20 restaurants, including its stores in Utah and Kansas City, as well as multiple locations in Chicago and Dallas. The company does not currently anticipate closing any of its Southern California locations.


“We started here in San Diego 38 years ago, and historically through that period our Southern California restaurants have been strong performers. And that continues to be the case,” said Don Cowan, Garden Fresh communications director.

Garden Fresh may also be suffering as a result of the societal shift away from what’s referred to as “family” dining.

“This particular segment has been eroding for years,” Gordon said. “It’s true to say that, in general, American dining interest ... has generally moved away from these big, value-oriented buffet type organizations.”

Garden Fresh said it expects to emerge from the Chapter 11 process by Dec. 5.


jennifer.vangrove@sduniontribune.com (619) 293-1840 Twitter: @jbruin

UPDATES:

6:01 p.m.: This article was updated with additional details.


4:15 p.m., Tuesday: This article was updated with information on store closures.