Bankruptcy judge OKs $11M sale of Olga’s to Schostak
A Detroit federal bankruptcy judge approved Tuesday the sale of bankrupt Olga’s Kitchen Inc. to an affiliate of Team Schostak Family Restaurants, ensuring the Troy-based restaurant chain known for its signature gyro sandwich and bread named after its founder will continue operating.
SOK Venture LLC, an affiliate of the Livonia-based company that owns 65 Applebee’s, four Del Taco and two MOD Pizza outlets, bid about $10.98 million for Olga’s more than 25 restaurants. It bested Cosmo Hospitality LLC, a Troy-based firm that pledged $8.55 million, according to a court filing.
“Judge Walter Shapero indicated that he would enter the order approving the sale motion,” Olga’s Kitchen attorney Bob Bassel said in a Tuesday email.
SOK Venture is set to close the deal and take over Olga’s on Dec. 11, Bassel said.
“The purchaser of Olga’s is familiar with the business because it owns 11 of the stores with Olga’s, and everyone in Detroit wishes them success to continue the brand started in the 1970s by founder Olga Loizon,” Bassel said in a Tuesday email.
Mark Schostak, executive chairman of Team Schostak Family Restaurants, said Friday his company “looks forward to leading Olga’s to a brighter future,” but wouldn’t divulge its plans for the iconic Metro Detroit eateries. Olga’s chief restructuring officer Gene Kohut expects improvements.
“I think it’s likely they will enhance some of the locations and make some cosmetic changes,” Kohut said Friday.
The deal will help Team Schostak pursue a diversification strategy that it started in July when it sold 60 Burger King franchises it owned. The company is now set to own an Olga’s chain that sits between Schostak’s fast-food outlets of Del Taco and the more traditional sit-down eateries of Applebee’s.
The proposed sale comes five months after Olga’s Kitchen filed for bankruptcy reorganization protection. The company owed at least $4.48 million in unpaid loans and credit while having between $1 million and $10 million in assets.
At its height in the 1980s, there were 56 Olga’s restaurants in 11 states, as far away as Texas, Oklahoma, California and Maryland. But by 1997, the company’s sluggish sales forced the closure of many out-of-state stores and the remodeling of many locations at home.
In the wake of the 2008-09 recession, Olga’s struggled to adjust to the changing restaurant market where the fast-casual approach gained popularity. The chain diversified its menu, offering more sophisticated sandwiches and salads, and additional appetizers such as hummus and sweet potato fries.
In 2011, the chain created a fast-casual outlet on Woodward in Royal Oak, where patrons could get in and out quicker but still could find seating if they want to linger and enjoy their meals in a restaurant setting.
The chain added a fast-casual restaurant in downtown Detroit, but didn’t expand the concept much further. The Detroit outlet was closed in September as the chain cut costs in bankruptcy.
Among Olga's Kitchen's largest unsecured creditors were RBS Citizens in Detroit at $2.4 million and Commerce Township-based food service supplier Sysco at $1.2 million. A $300,000 payment to Sysco was part of the bidding prices, according to court filings.
SOK Venture kicked off the process with a $8.3 million bid before the auction as a way of testing the market.
After Cosmo Hospital increased the price by $200,000 to $8.55 million, the Team Schostak affiliate sweetened the pot by $2.4 million — $10.95 million plus a still fluctuating payment of $305,000 for creditor Sysco’s food inventory, Kohut said.