Citing “considerable distress” in the restaurant industry, the parent company of craft-centric on-premise chain World of Beer has filed for Chapter 11 bankruptcy protection.
WOB Holdings and 11 affiliates, some of which have already closed, filed a petition in the U.S. Bankruptcy Court for the Middle District of Florida’s Tampa Division on August 2. In it, World of Beer claimed that it has between $0 and $50,000 in assets and between $10 million and $50 million in liabilities owed to between one and 49 creditors.
The company owes $25.6 million across two loans to secured creditor Synovus Bank, which will take first priority in repayment. World of Beer’s collateral to Synovus “is significantly less than the amount of the debt,” according to a joint Chapter 11 case management summary submitted to the court. In that document, World of Beer estimated its assets — including “inventory, cash, leasehold improvements, furniture, fixtures, computer and POS systems, bar and kitchen equipment and receivables” — are valued around $20 million.
The World of Beer chain comprises 34 locations, “some owned directly, some joint ventured and some franchised,” according The affiliates included in the bankruptcy filing are company locations, not franchises.
The debtors include World of Beer, Inc., which is the parent company of all other debtors; WOB Holdings, LLC; WOBF, LLC; World of Beer Franchising, LLC; and the following locations:
- WOB Gainesville, LLC;
- WOB OT Orlando, LLC;
- WOB Doral, LLC;
- WOB Miramar, LLC;
- WOB Destin, LLC;
- WOB Royal Palm, LLC;
- WOB Myrtle Beach I, LLC;
- And WOB Louisville I, LLC.
For the first half of 2024, the debtors’ combined gross revenue was $9.9 million, according to the case management summary.
Of the debtor locations, four have closed within the past year: Gainesville, Doral and Destin, Florida; and Myrtle Beach, South Carolina. World of Beer has also shuttered four other company-owned locations: College Station and Fort Worth, Texas; Lafayette, Louisiana; and Fort Myers, Florida.
In addition, six franchise locations have also closed in the past year: Dublin, California; Spanish Springs, Florida; Indianapolis, Indiana; Towson, Maryland; Syracuse, New York; and Middleton, Wisconsin.
The COVID-19 pandemic “took a hard economic hit” on World of Beer’s business, and 15% of its locations did not reopen after “the market did not rebound soon enough,” the company wrote.
In mid-2020, “anticipating the worst of the COVID pandemic impact was behind it,” World of Beer took out an $8 million loan from the Federal Reserve’s Main Street Lending Program to build out three new locations for which it had already signed leases. The restaurants opened and have since closed, but not without lease obligations creating “a materially significant drain on cash flow,” according to the case management summary.
In addition to the pandemic-driven decline in foot traffic, World of Beer was also hampered by “outstanding debts to landlords (lease guarantees), litigation with two franchisees, legal fees, along with our bank debt and considerably elevated interest rates.”
“Due to the economic environment in which the debtors operate, traffic counts are greatly diminished with consumers opting for less frequent dining occasions and more value-oriented destinations,” the company wrote. “Compounding the challenges are inflationary influences on our supply chain and overall operating costs, combined with the lack of consumer elasticity for continued price increases.”
Tampa, Florida-headquartered World of Beer opened in 2007 with “a very simple model to operate” that required “low capital investment,” according to the case management summary. Restaurant industry veteran Paul Avery acquired a controlling interest in the business in 2013, and sought to elevate the chain’s food and spirits program, which resulted in “a contentious relationship” with some “reluctant” franchisees.
“During this transitionary period, WOB Franchising unsuccessfully defended its rights in several legal cases, resulting in several millions of dollars in lost royalties and legal fees which continue to affect the business today,” the company wrote. “Meanwhile, consistent with this evolution in operations, the craft beer industry as a whole generally transitioned to include food and spirit programs.”
Avery, Avery Restaurant Enterprises and a trust in his name collectively own 43.42% of the company, according to court filings. The next largest equity holders are JP Beer Partners, LLC, and Tampa Beer Partners, LLC, which each own 11.37%.
Less than a decade ago, World of Beer had as many as 71 locations in 19 states, according to a press release. Today, fewer than half are still in existence. Those that closed took with them likely hundreds of draft lines available for craft brewers.
The on-premise is slowly clawing itself out of the hole the pandemic plunged it in. As of June, there were 250 beer-selling outlets (both on- and off-premise) per 100,000 people in the country, according to TDLinx data shared by National Beer Wholesalers Association (NBWA) chief economist and VP of analytics Lester Jones during a webinar last month. That number has increased steadily since 2020, when it dropped to 242, lower even than the 245 it maintained during the 2008 recession. Of the nearly 21,000 beer-selling retailers that have opened since 2022, 70.2% of them have been in the on-premise channel.
As the on-premise continues to recover, it will do so with fewer World of Beer locations, as the company plans to “shutter negatively performing operations” to focus on better or neutral performers.
“The current debtors’ concept and operations are sustainable on a move-forward basis, isolating legacy litigation and shuttered lease location indebtedness and restructuring secured debt obligations,” the company wrote. “These restructuring efforts will provide the debtors the opportunity to maximize productive operations, eliminate negative operations, focus on core business, preserve jobs, and provide a long-term restructuring to enable the business to both survive and thrive. A restructuring will be far superior to a liquidation.”
In addition to the $25.6 million it owes Synovus, World of Beer also owes $3.8 million to unsecured creditors and $89,277 in gross wages to 740 employees.