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One of America's Oldest Steakhouse Chains Is In a Lawsuit For Its Survival

The company faces an uncertain future without another PPP loan.

Since filing for bankruptcy last September, long-standing family steakhouse chain Sizzler has been on an uncertain path into the future. It emerged from the Chapter 11 protection in January with a reorganization plan, but it was relying on a second round of the Paycheck Protection Program funds to stay the course. However, its loan application was blocked by the U.S. Small Business Administration (SBA) due to the bankruptcy, and the chain is now suing the agency in a last-ditch effort to stay afloat.

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With the PPP application deadline ending on May 31, the likelihood of Sizzler obtaining the $2 million loan is uncertain at best. Failing to do so may cause the company to suffer significant losses including "the loss of cash to pay employees and basic operating expenses," according to the lawsuit.

The chain claims that the "hold" placed by the agency on its application goes against the new rules put forth on April 6, which now allow companies that have emerged from bankruptcy to have access to PPP funds. But because its application was blocked on two separate filings, the chain's time to get the much-needed cash injection may be up.

"There is a substantial likelihood that the remaining PPP funds will be completely exhausted even before May 31," said the complaint filed on May 24. "Though Sizzler Restaurants has done everything in its power to obtain a second draw PPP loan, the SBA's unlawful rules, regulations and practices designed to unlawfully exclude debtors from participating in the PPP have prevented it from doing so."

This would be the chain's second PPP loan since the start of the pandemic. According to FSR Magazine, the chain received $3.9 million from SBA in April of 2020, but the loan ultimately wasn't enough to keep it out of bankruptcy.

"Our current financial state is a direct consequence of the pandemic's economic impact," Sizzler President Chris Perkins said in the bankruptcy filing in September, "due to long-term indoor dining closures and landlords' refusal to provide necessary rent abatements."

However, Sizzler was on a decline even before the pandemic wreaked havoc on dine-in businesses. The company was losing locations and its sales were on a decline for five consecutive years in 2019, according to Restaurant Business. The chain currently operates just over 100 restaurants, 14 of which are company-owned. Its bankruptcy filing affected only these locations and none of the franchised restaurants in the United States or its businesses abroad.

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Mura Dominko
Mura is a senior news editor leading ETNT's coverage of America's favorite fast foods and restaurant chains. Read more