Houston Attorneys:Board Certified Bankruptcy Lawyer

713-623-4242

Debt Management Law News

July 28, 2010

Katz's Deli files for bankruptcy

About a week after CNBC broadcast from Katz’s Deli to announce Texas as the best state for business, the iconic downtown Austin eatery, which has a location in Houston, has filed for bankruptcy.

Despite the July 20 Chapter 11 filing by parent company M&M Katz Inc., owner Marc Katz said the deli’s motto — “Katz’s Never Kloses” — will remain true, albeit probably not at the 618 W. Sixth St. location he has called home for three decades.

Katz’s Deli, founded in 1979, when the then-33-year-old New Yorker had “more hair and a lot less belly,” serves New York-style deli classics and traditional Jewish kosher-style cuisine.

Katz said the bankruptcy is not related to a failed recent campaign to run for state political office. Although local media reported his family planned to spend millions on a bid for lieutenant governor, Katz said they decided against the idea.

Instead, he said rent is too expensive and his landlord has threatened to evict him, after Katz sold him the building during hardship and leased space back.

In 2006, Katz said he leased back the deli space and nearby parking for the next 20 years, after selling three downtown properties for $4.4 million.

Current court records show he is paying $22,478 a month in rent, or $269,000 per year, almost $200,000 more than his annual salary.

Katz said agreeing to his lease terms was his “biggest mistake,” but also said he was “asleep at the wheel” and did not respond to rising costs and declining economic conditions quickly enough.

Katz’s Deli owes $121,900 in federal, state and county taxes, according to court records. The company owes about 14 vendors about $30,000 and owes more than 55 past and present employees about $26,000.

The company has annual revenue of about $2.7 million, based on court records that said monthly revenue is $225,900.

Katz said he is looking at several new locations, but did not disclose what parts of town they are in, although he hinted at leaving downtown.

“All options are open. I’ve been looking north and south,” he said.

Katz said he never recovered financially from a falling out years ago with his son, Barry, who owns and operates delis in Houston, including a Katz's Deli on 616 Westheimer St. The manager on duty referred all calls to Barry Katz, who could not be reached at the time of writing.

Although the two were estranged for many years, they are now talking again, Katz said.

Katz’s filed for Chapter 11 bankruptcy once before, in 2004, with about $6 million in debt and as many as 99 creditors, including the IRS, lender Amresco Commercial Finance LLC, Dallas-based law firm Hughes and Luce LLP, and Katz’s son. A restructuring plan for the bankruptcy was approved in 2005.

Today, the cost of doing business, including insurance and taxes, is rising, and “in hard times you have to cut back, and I didn’t do it fast enough,” Katz said.

“These are things I don’t sell,” he said “I sell corned beef.”

www.bizjournals.com

Sometimes, debt can be overwhelming, and bankruptcy becomes necessary.
Bankruptcy can sometimes be difficult. If you are considering bankruptcy, contact the Houston bankruptcy lawyers of Weston & Associates, PLLC at 713-623-4242


More...