The Star Diner in the Kentlands may have hit a rough patch, but co-owner Marty Kobrin says the popular eatery will continue serving up burgers, fries, shakes and other traditional diner fare.
The business filed for Chapter 11 bankruptcy protection last week, as high rents are squeezing his bottom line, Kobrin said Tuesday. He said he expects the restaurant to emerge from bankruptcy soon.
The bankruptcy filing shows the Gaithersburg restaurant is $262,180 in debt, including $180,360 owed to the landlord, Beatty Management of McLean, Va. Other creditors are mostly food providers and Pepco. The filing also lists assets of $50,000 or less.
This isn’t the restaurant’s first brush with bankruptcy. It was briefly in Chapter 11 protection in 2002 when, Korbin said, his former business partner was running the restaurant’s day-to-day operations.
Together, Kobrin and his wife, Sharon, own 90 percent of the business, which includes an outdoor tiki bar during warmer months. The business also provides catering services.
Kobrin said all his vendors are behind him in working out repayments and continuing service. Kobrin and his attorney, Merrill Cohen of Cohen, Baldinger & Greenfeld, plan to meet soon with a representative of Beatty Management.
“We’re going to try to work out a payment schedule to pay back the rent that’s owed and get him in a position where he can afford the rent going forward,” Cohen said.
Cohen added that most leases include escalation clauses, in which rent increases by a certain amount each year. He did not know whether that was the case with Star Diner, but in a recession it can be hard for small businesses to keep up with this marginal increase.
“The economy’s been a little sluggish. I’m trying to reorganize and we hope to stay,” Kobrin said. He has been an owner of the restaurant for almost 14 years, and said the neighborhood location can be difficult.
“Monday through Friday it’s really quiet here,” he said.
It can be an especially tough time for independent restaurants.
“The fast-food restaurants are doing well and upscale chains,” said George Ritzer, a sociology professor at the University of Maryland, College Park, who specializes in the restaurant industry. “Restaurants like diners are on the bubble and the impacts of the recession — they’re going to feel it first and they don’t have much capital to get through hard times.”
Beatty Management declined to comment Tuesday.