The deep-dish pizza that Uno serves (which is much more Italian than Chicagoan) is great stuff, and people love it. Nonetheless, Uno is in dire straits, both because people are increasingly avoiding the expense of sit-down restaurants and because the chain, like many of its ilk, is owned by private equity.
The Wall Street Journal on Wednesday reported that the cash-strapped chain, which operates more than 200 outlets, will not make a scheduled bond payment this week.
Uno started as a single pizzeria -- Pizzeria Uno -- that became an institution in Chicago and helped spread the false notion that deep-dish is the city's dish. Many Chicagoans considered it "tourist pizza," though few argued that it wasn't delicious.
Uno's parent company, Uno Restaurant Holdings, is now based in Boston. It was acquired in 2005 in a management buyout that included the private-equity shop Centre Partners.
On Friday, it is supposed to pay a $7.5 million interest payment on the $141 million in secured notes it has issued. The Journal's two unidentified sources say the company plans to skip that payment and is negotiating with six noteholders.
These are tough times for mid-level chain eateries. Bennigan's went out of business a few weeks ago. Other chains including Chevy's Fresh Mex, Marie Callendar's and Perkins (formerly Perkins Cake 'n' Steak) -- all financed with private equity -- are in talks with lenders, according to the Journal.
Uno's sales have fallen for three quarters in a row and were off by 7.7 percent in the first quarter of this year.
Before the credit crunch and its impact on cash flow, Uno had some good years. Starting in the '90s, it vastly expanded its menu and eventually dropped "Pizzeria" from its name, though pizza remained its staple dish.
Squeezed by rising prices and falling employment, consumers are opting to either eat at home or stick with fast food. Meanwhile, many of these chains are suffering from the debt loads taken on by their private-equity buyers. Paying off massive bond issues even while spending more for ingredients leaves little room for capital investments such as store improvements or even for developing new menu items or spending much on marketing.
Uno insists it's not facing bankruptcy, but that will depend on what its creditors have to say, and on how soon the economy bottoms out.