Once a darling among Tampa Bay's budget-seafood fans, Shells Seafood Restaurants Inc. has parked its two-year struggle for a return to profitability in bankruptcy court.
The Tampa-based chain used the Chapter 11 filing as an occasion to close eight of the 22 remaining Shells stores Wednesday including locations in St. Petersburg and Holmes Beach in Manatee County. The chain also shut down all three stores in Orlando.
The latest in a series of failed turnaround stories in the stressed casual restaurant industry, Shells lost $12-million the past two years. New management that arrived three months ago hopes to nurse the chain back to health with a new menu and maybe even a new name.
Shells, which recently cut prices and broadened its seafood menu to include ribs, is another victim in a casual sit-down restaurant industry grappling with a moribund economy, changed consumer tastes, higher costs and a shrinking customer base.
"The economy is accelerating some undercurrents began eight years ago," said Harry Balzer, who tracks American eating habits for NPD Group, a Chicago research firm. "There's still a social component to going out to a sit-down restaurants. But for day-in-and-day-out fuel, people want to eat at home. They want takeout food cheap and easy."
So those tasteful mid-tier dining spots jammed on the weekends are struggling on weeknights.
Indeed, experts concede they misread the boom-time growth of casual restaurant chains. Now they realize chains were mostly stealing customers from thinning ranks of mid-priced family restaurants. Growth shifted to quick-serve chains dishing up fresh, usually nonfried food like Subway and a flood of sandwich shop imitators and more upscale fast-casual eateries like Panera Bread or Chipolte Mexican Grill.
"Basically, it's supermarket takeout food and restaurants without waiters," said Balzer.
The Tyrone area of St. Petersburg embodies the trend. It's home to nine empty chain restaurants and a Sam Seltzer's Steakhouse, whose parent is in Chapter 11.
Shells disclosed Aug. 13 there were questions about its ability "to continue as a going concern." On June 29 it had $4-million more in bills than assets. This was despite pocketing $1-million paid nine months ago from a Saudi group for rights to open Shells in the Middle East.
Shells was founded in 1985 by Swiss gourmet chef John Christen, who also was behind the Cafe Geneva salad dressing line sold in grocery stores. He earned a following with no-frills stores, bare tables and such dishes as shrimp pasta and clam chowder.
Christen was gone, however, once the company went public in 1993. The chain expanded into the Midwest but eventually retreated. From a peak of 45 stores Shells shrunk to 24, all of them in Florida when chief executive Leslie Christon, left Feb. 29.
Business continued a steep decline since then. Revenue dived 22 percent in the quarter ended June 29. Sales in stores open more than a year declined 18 percent. Meanwhile, Shells swallowed higher food costs, energy bills and Florida's increased minimum wage.
Marc Bernstein, onetime operations director at a 10-store New York City chain called Dallas BBQ, took over as chief executive in June for the equivalent of $148,000 in stock options. Warren Nelson, chief financial officer for 14 years who had served as Shell's president, resigned last week.
It remains to be seen what the options are worth. Shell's stock, which hit a 52-year high of 19 cents a share Oct. 31, closed Wednesday at 0.01 cent.
Company officials declined to comment. In a statement, Bernstein blamed the economy.
"The 10 remaining (company-owned) restaurants have the strongest historical performance or the greatest potential," he said. "It is our goal to emerge from Chapter 11 as soon as we can with a capital structure and balance sheet that will allow us to continue to operate."
Meantime, the company's 15th store in Pembroke Pines, which is not part of the bankruptcy, recently reopened as Rock Beach Grill. It's a new concept run by a partnership with Shells led by Bernstein's father, Barry.
Mark Albright can be reached at [email protected] or (727) 893-8252.