The dream of extending your company across different communities with multiple retail outlets can become a nightmare when your retail locations do not pull in enough revenue and your business becomes burdened by excessive debt. But if you successfully file for Chapter 11 bankruptcy, you have an opportunity to reorganize your business.
Under Chapter 11 protection, you will devise a plan to restructure your business so that it can become profitable again. You will likely make many decisions to change your business, including how it operates. As Kiplinger explains, you must also decide what to do with your retail locations. There are a few possible options you could explore.
Hold on to some of them
The idea of Chapter 11 is to relieve your debt and return your operation to solvency, so you will likely hold on to some of your properties for future use. The properties you will keep will probably depend on which locations are still profitable. The locations that you are losing money on may be the ones you get rid of.
Sell some locations
If you own your retail locations, the decision may be clear. You will sell off the outlets that are losing you money. This could be a boon to your bankruptcy plans since a high price on a store could net you money towards paying your creditors. Still, you should tailor your expectations to the traffic level of the retail location. Your outlet might not fetch a high price if it does not attract a large number of customers.
Return locations to a landlord
Like many companies, you probably rent your retail locations. By entering bankruptcy, you have the opportunity to break your lease agreements. This not only helps you get rid of unprofitable retail outlets, but it can stop the money drain of a leasing agreement with burdensome provisions. As an alternative, some companies secure a break from paying their rent and resume later.
Even if you retain some of your locations, you probably will have to sell off some equipment or excess inventory. These sales may not secure a lot of money, but they will nonetheless contribute towards your company regaining its financial independence.