Olga's Kitchen may be saved from bankruptcy by Schostak

Olga’s Kitchen, a Detroit-area brand that fell on hard times as dining habits changed and shopping malls declined, could be purchased out of bankruptcy by Schostak Family Restaurants, which already owns part of 11 Olga's locations that are not part of the bankruptcy.

Livonia-based Team Schostak Family Restaurants bid $8.3 million for all 27 remaining Olga's restaurants. Those locations are currently up for grabs in an auction that runs through Monday..

Schostak Family Restaurants already owns 50% of the 11 Olga's locations not in bankruptcy through a decade-old development agreement with the regional pita wrap chain. Those restaurants have historically been profitable. If Schostak wins the auction, it would gain full control of those 11 locations — plus ownership of the 15 restaurants that Olga's still runs on its own.

Schostak also would get the Olga's location at Woodland Mall outside Grand Rapids, which has a different ownership structure.

Executive Chairman Mark Schostak said the company was "pleased to have the opportunity, through its affiliate SOK Venture, to acquire Olga’s Kitchen and preserve and grow its iconic brand."

The company declined to answer additional questions.

Several landlords and other creditors have filed objections to the bidding process. Taubman Centers said the time frame is too short and said Schostak has not said whether it will continue to operate the locations it is buying or continue to make lease payments.

Olga's Kitchen filed for Chapter 11 bankruptcy protection in June and, in early September, closed its downtown Detroit restaurant near Campus Martius.

The company, purchased from its namesake Olga Loizon by California businessman Robert Solomon in the 1980s, grew to more than 50 restaurants by expanding into regional malls. But the heavy costs of expansion led the company to close about half its restaurants in the 1990s and early 2000s as leases expired.

In recent years, some Olga's Kitchen locations have struggled amid consumers' changing tastes and the rise of popular fast-casual restaurants such as Chipotle. The chain has also been hurt by declining foot traffic in shopping malls.

A few of the newer Olga's restaurants, such as its Royal Oak location, do operate on a fast-casual model where patrons can get food without first sitting down.

An attorney representing Olga's has estimated the restaurant chain's total debt at about $16 million.

Five other entities besides Schostak have expressed a strong interest this fall in buying Olga's Kitchen, according to bankruptcy court filings.

Team Schostak also has 67 Applebee's restaurants, four Del Tacos and two MOD Pizzas. The company was a longtime owner of dozens of Burger King restaurants in Michigan until July, when it sold all 60.