Joe’s Crab Shack Owner Files For Bankruptcy, Preps For Sale Of Chain

Image courtesy of SA_Steve

A year after its failed no-tipping policy experiment and a month after rumors began swirling that Joe’s Crab Shack parent company Ignite Restaurants was prepping for bankruptcy, the company has done just that and revealed plans to sell itself to a private equity firm.

Ignite Restaurant Group announced Tuesday that amid slumping sales and turnaround efforts it entered into an agreement with Kelly Companies to sell both the Joe’s Crab Shack and Brick House Tavern + Tap brands.

In order to facilitate the sale to the San Diego-based private equity firm, Ignite and its subsidiaries filed voluntary petitions [PDF] for reorganization under Chapter 11. This, the company claims, will allow it to complete the sale of its assets within 60 to 90 days.

Houston-based Ignite notes that per bankruptcy procedure it will participate in a bidding process to allow other companies the opportunity to submit bids to purchase the assets being sold.

Still, Ignite notes that Kelly Companies is already “committed to invest in our brands’ future growth and success.”

As it goes through both the bankruptcy and sales process, Ignite says all 112 Joe’s Crab Shack and 25 Brick House Tavern restaurants will remain open.

In an FAQ for guests, the company says that it will continue to accept gift cards, coupons, and other customer promotions in accordance with its policies and procedures.

Consumerist has reached out to Ignite for comment on the sale and bankruptcy filings. We’ll update this post if we hear back.

Trouble for Ignite came to the forefront in April, when the company announced in a K-10 filing that it was pursuing strategic alternatives in an effort to improve its capital structure.

Before that, Joe’s Crab Shack made headlines last year when the company backed away from its no-tipping policy that began in Nov. 2015.

Under the policy, the company said it would implement a new set wage practice. Servers were to be paid at a rate starting at $14/hour based on their past performance. To generate the revenue needed for the new wages, the company executed a 12% to 15% increase to the restaurant’s menu.

Six months later, the company ditched the policy and brought back its standard system.

With its bankruptcy filing, Ignite joins a long list of restaurant chains dealing with financial issues to either close or file, including Bob Evan’s, Old Country Buffet, Cosi, Ruby Tuesday, and Logan’s Roadhouse.