Michigan-based Olga's Kitchen files for bankruptcy

Olga's Kitchen has filed for Chapter 11 bankruptcy protection but a company executive promises the restaurant chain famous for its Mediterranean-inspired wrapped sandwiches has a bright future.

"My task was to get back to the basics of what Olga's was all about, and we've been working really hard at that," company chief operating officer Michael Kosloski said.

The company has closed eight under-performing locations over the past year and is in the process of improving the sales of the restaurants.

Kosloski said the company's 28 restaurants will stay open throughout the bankruptcy process. All but a restaurant in Alton, Ill., are in Michigan.

"We have had some problems with profitability in the restaurants that we have now fixed," he said. "The reason we filed for bankruptcy protection is to restructure the debt or to potentially sell the business."

All eight of the locations that were closed were inside regional malls. Many of the company's newer locations, such as its location in Royal Oak, operate on a fast casual model that allow patrons to order and leave without sitting down for service.

The company continues to operate nine restaurants inside malls and 19 restaurants that are either free-standing locations or locations at strip malls.

Founded in Birmingham by Olga Loizon in 1970, the company had in recent years been seeking to revitalize its brand by updating its look and adding new recipes — and open up to 100 stores nationwide, many of them franchises.

Loizon, who recently celebrated her 89th birthday, is no longer an owner of the company but remains involved with the company. Today, the company is owned by Robert Solomon.

Kosloski, who previously was Olga's vice president of operations between 2008 and 2012 and rejoined the company about a year ago, still believes the company can expand regionally.

The company's creditors include banks, a food distributor and law firm.

The bankruptcy filing lists more than 11 creditors and owes those creditors at least $4.5 million.

The top three are: RBS Citizens bank, $2.4 million; Sysco, $1.2 million. and attorneys Dickinson Wright, $103,843. Other creditors included American Express, Arf Financial and DelBene Produce.

Robert Bassel, the attorney representing the company, estimates the company's total debt is about $16 million.

"The preference of the ownership is to try to retain ownership of the business and to restructure the debt and to identify investors and exit financing," Bassel said.

This is at least the company's third effort to restructure.

Olga's grew to more than 50 restaurants in the 1980s by expanding into regional malls. But the costs of expanding into too many markets prompted the company to close about half its restaurants in the 1990s and early 2000s as leases expired.

In 2004, Olga's entered into a development agreement with Livonia-based Schostak Family Restaurants. Schostak agreed to develop 15 Olga's Kitchens in metro Detroit. So far, they have built 11. The revenues of those restaurants are split between the companies. Kosloski said those 11 restaurants are not part of the bankruptcy.

In 2013, the company hired a new CEO, Jonathan Fox, who announced an ambitious plan to try to revitalize the brand by returning to its roots and create more consistency throughout its stores. Fox is no longer with the company.

Contact Brent Snavely: 313-222-6512 or bsnavely@freepress.com. Follow him on Twitter @BrentSnavely.

Olga's timeline:

1970: Founded in Birmingham by Olga Loizon.

1980s: Grew to more than 50 restaurants by expanding in regional malls.

1990s/2000s: Scaled back, closed unprofitable locations.

2004: Reaches joint development agreement with Schostak Family Restaurants.

2012: Opens 36th location in Compuware building in Detroit.

June 11, 2015: Files for bankruptcy, hopes to restructure.

Source: Free Press research