INDIANAPOLIS, Ind. – Indianapolis-based Scotty’s Brewhouse and Scotty’s Thr3E Wise Men Brewing Company have filed for bankruptcy.
According to court documents filed with the Southern District of Indiana on Dec. 11, the business is seeking Chapter 11 bankruptcy protection. That’s also known as “reorganization” bankruptcy that allows a company to stay afloat while trying to pay off creditors.
The documents are signed by Berekk Blackwell, who’s listed as the company’s executive manager. Blackwell is also listed as the vice president of Due North Holdings LLC, the company that bought Scotty’s Holdings in 2016 with plans to expand the brand.
The petition for bankruptcy listed several Scotty’s Brewhouse locations, Scotty’s Thr3E Wise Men Brewing Company and A Pots & Pans Production. The company is represented in bankruptcy proceedings by the law firm of Quarles & Brady LLP.
The filing names Huntington National Bank of Columbus, Ohio, and Rewards Network Establishment Services Inc. of Chicago, Illinois, as secured creditors. Unsecured creditors include zGrowth Partners LLC of Clinton Township, Michigan; Due North Holdings LLC of Scottsdale, Arizona; and the Indiana secretary of state.
The company will close restaurants in Carmel, Muncie and downtown Indianapolis. A fourth location in Waco, Texas will also close.
“The process we have initiated today will allow us the opportunity to emerge stronger and better position the Company for growth. We will close locations that are not profitable by the end of this year," said Chris Martin, Brand President of Scotty’s Brewhouse. "Additionally, the company moving forward will focus its efforts on growing the brand through franchising as well as management agreements. These actions will allow us to provide better service to our guests and strategically expand with new locations in the future.”
Scotty’s Brewhouse has several locations around Indiana, including Indianapolis, Bloomington, Muncie, Carmel and Fort Wayne. It also has out-of-state restaurants in Illinois, Ohio, Texas and Missouri, according to its website.
Scotty's founder Scott Wise issued this statement:
"I learned of the Scotty's and Thr3e Wise Men bankruptcy filing today at the same time as the public. Although I have been separated from the company for over a year and haven't been involved in any Scotty's management in over 2 years, I can't say my heart and soul ever left after building a company into 18 locations in 4 states over 20 years. Not only did I spend half my life and my entire career at Scotty's; but, I worked with some of the best people I could ever imagined. We grew a community-centric, philanthropic focused brand that was more than just food and drink - it was a feeling of warmth and smiles and generosity that I will never forget. I'm mostly saddened by the news as it is affecting many employees right before the holidays. I am hopeful that the Chapter 11 reorganization gives the new owners the opportunity to go back and correct all the reasons that led to this situation. And, I am hopeful that they can come out of this situation as a stronger, better and more profitable company in the future."
University of Indianapolis economics professor Dr. Matt Will called Wise, "The guy that really made them successful." After Wise sold the company, Will said the new, Arizona-based ownership focused more on franchising more Scotty's and less on the daily operations.
"When you are dealing with 5% profit margins, if your operations drop you're out of business," Dr. Will said, "The operations of this company are managed in Phoenix, what does that tell you about their ability to be in touch with the trends happening in the Midwest?"
In court documents, the company cited numerous reasons for closing the four locations. They said the downtown Indy spot became less profitable as heavy competition increased downtown over the past ten years, while in Muncie, they said demographics changed. For Carmel, the company said it's location is too close to other Scotty's which can cannibalize foot traffic from itself, and the other locations.
The Waco, Texas location is a different story. In 2015, a fight between rival biker gangs at an establishment called Twin Peaks, resulted in nine people dead as the brawl turned into a shoot out. Scotty's Brewhouse moved in after Twin Peaks folded. The documents said the company did not expect the incident at the previous company to have such a profound impact on their company.