In its bankruptcy filings, Cannon’s Chophouse, the newly closed restaurant in downtown Meadville, lists its liquor license as its most valuable asset, worth an estimated $60,000.
The license’s value on the open market is likely to become more clear over the next several weeks.
Cannon’s is close to reaching a deal to sell the liquor license and other assets to raise funds to pay creditors whatever it can to close out its Chapter 11 case in U.S. Bankruptcy Court in Erie, the restaurant’s bankruptcy lawyer said.
Cannon’s is looking “to sell the assets in a way that is somewhat beneficial to the bankruptcy estate,” attorney Michael Kruszewski said at a court hearing on Tuesday.
He told U.S. Bankruptcy Judge Carlota Bohm that he has identified a prospective buyer and intends to file a sale motion within a week or two.
Liquor licenses usually change hands in private sales, a situation that keeps the sale prices confidential. The sale of the Cannon’s liquor license through a public court action could provide a look at the market value of a liquor license in northwestern Pennsylvania.
What happened to Cannon’s reorganization plan?
The imminent sale of the liquor license also signals that Cannon’s bankruptcy has moved away from a plan of reorganization to a plan of liquidation, Kruszewski said at the hearing and in a report he filed with the judge on Monday.
Cannon’s filed for bankruptcy in February after losing money due to what its owner, Charlie Bish, told the Erie Times-News was the result of overexpansion and the financial impact of the pandemic.
At one time, Cannon’s — its parent company is T.G. Holdings LLC — operated five restaurants from Michigan to Pittsburgh. In November 2009, it opened its first restaurant in the Meadville area, on Highline Drive off Route 19, in Vernon Township, Crawford County.
Cannon’s Chophouse opened a restaurant in the Erie area in 2018. It closed in 2019. That restaurant was located at 7165 Peach St. in Summit Township, the site of the former Famous Dave’s restaurant. A Dunkin’ now operates at that spot.
By the time Cannon’s filed for bankruptcy, it was operating one restaurant in a building it leased at 994 Market St. in Meadville. Cannon’s opened at that location, the site of the former 1776 Bar & Grill, in October 2021.
In May, Cannon’s submitted a Chapter 11 plan to stay in business and reorganize to pay its 17 creditors, owed a total of as much as $881,398, according to court records. The plan called for Cannon’s to pay the creditors 2% of what they are owed — a total of $17,628, with the final payments due in August 2028, when the plan would end.
The two largest unsecured creditors are the Erie-based Curtze Food Service, whose final claim was $277,933, and the federal Small Business Administration, whose final claim was $278,659, according to the plan submitted in May. Curtze would have received $5,559 under the 2% payout. The SBA would have received $5,573.
Curtze’s claim covers unpaid bills that go back several years for food provided to a number of Cannon’s restaurants, including those that went out of business, according to court records. A Curtze representative has declined to comment on the debt.
How much can Cannon’s creditors expect to get paid?
Cannon’s abandoned the Chapter 11 plan as unfeasible following a hearing before Judge Bohm in June. The plan completely collapsed with the closing of Cannon’s on Aug. 3 “due to the ongoing decrease in gross sales and the accumulation of unpaid bills,” Kruszewski said in the report filed on Monday. Cannon’s paid all its employees up until it closed, according to the report.
The closing and the end of the Chapter 11 plan led Cannon’s to pursue a plan to sell its assets, including the liquor license, worth an estimated $60,000, and any furniture, worth an estimated $5,000, according to the bankruptcy records. The new strategy all but guarantees that the creditors will get less than the 2% payout proposed in the Chapter 11 plan.
At Tuesday’s hearing, Kruszewski said the sale of the assets will include “a carve out” for payments to the IRS.
The IRS is Cannon’s only secured creditor. It is owed $74,515 in secured debt and has placed a lien on Cannon’s liquor license; office furniture; and other limited assets to ensure the IRS gets paid something, according to the bankruptcy records.
How much the IRS or any other creditor will get largely depends on how much the liquor license sells for.
“We are trying to move this as quickly as possible,” Kruszewski said.
Contact Ed Palattella at [email protected]. Follow him on X @ETNpalattella.
This article originally appeared on Erie Times-News: Focus turns to liquor license in bankruptcy of Cannon’s Chophouse
