Friday night, after all the business journalists had left for the weekend, Pizzeria Uno announced that it cannot afford to pay the monthly interest on its debt.

Other family restaurant chains around the country have already taken this step, and more are expected to follow.   They are not declaring bankruptcy, just taking a first step in that direction.  Next, they will negotiate with their creditors, trying to work out lower monthly payments and restructure their debt.  If that doesn’t work, they will ask the courts to protect their assets from creditors while they reorganize,  or find a buyer willing to pay the bills and take over the company.  That step is called bankruptcy.

I dropped into Uno’s, on Fort Eddy Road, Saturday, to see if the employees knew about this, or what they had been told.

According to one employee, managers briefed the staff Saturday morning.  They said the company was not going bankrupt, that they have been opening new locations.  They’re expanding. (Since Enron, we’ve learned to start worrying when management tells you not to worry about bankruptcy.)

Of course, expansion is where the debt and monthly interest come from.  Maybe they expanded too much or too fast.  I suspect that they made an expansion plan based on revenue and growth assumptions that were valid at the time.  They did not realize how seriously this economy would affect their business.

Inexpensive family restaurants have always been recession-proof.  Everybody has to eat.  Well, in this economy, only fast food is cheap enough to be recession-proof.  Uno’s depends on families, couples and groups of friends looking for an affordable meal with large amounts of fresh food, and a wide variety of choices.   Too many customers stay home now.

Keeping their prices affordable is also difficult.  Most of their menu is beef, the most petroleum-intensive food product.  Cows eat corn, fertilized by petroleum products.   They travel to market in refrigerated trucks.  And the price of corn is increasing as supplies diminish.  More and more corn is now used for ethanol, the most energy inefficient way to reduce the price of gas at the pump.  To stay affordable, these restaurants have to absorb those increased costs until they can’t anymore.

Families should be able to go out to dinner once in a while.   It’s fun, and somebody else cleans up the mess.  We’ll see if that industry has a future.

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