HopCat seeks a path forward after bankruptcy, plans to focus on its home state, metro Detroit – Crain’s Detroit Business

"The mistake that I made, as the guy running the company, was to expand outside of Michigan, using debt to do it," Sellers told Crain's during an interview earlier this month. "I was under the false assumption that because the brand was so wildly popular in Michigan and would very easily translate to other states. And what we found is that in other states, we were just seen as any other chain. Whereas in Michigan we were considered a hometown hero, like Bob Seger."

At the time of the bankruptcy filing in June 2020, after the COVID pandemic had begun to wreak havoc with the economy, especially in the service sector, BarFly said it had between $1 million and $10 million in assets and liabilities of between $10 million and $50 million. Landlords had begun to sue the company over failure to pay rent, as Crain's reported at the time.

HopCat had begun to shutter locations even before the bankruptcy, in locations including Chicago's Lincoln Park neighborhood, and in Royal Oak, which closed in May 2020 after negotiations with its landlord fell through.

For Travis Baldwin, co-founder and principal of Dallas-based investment firm Congruent Investment Partners LLC, the mistakes acknowledged by Sellers were also apparent.

"Mistakes were made," Baldwin told Crain's. "(HopCat) grew too far out of state, (and) grew too far from the bread and butter that they were targeting."

HopCat has kept open two locations outside of Michigan, in Indianapolis and Lincoln, Neb.

To be sure, HopCat and the other BarFly restaurants that were acquired out of bankruptcy Stella's Lounge and Grand Rapids Brewing Company, both in downtown Grand Rapids were already facing massive headwinds.

Michigan restaurants were faced with more than 460 days "of closure, capacity restrictions and elevated regulatory scrutiny that forced more than one in six Michigan restaurants to close their doors for good," according to a June statement from Justin Winslow, president and CEO of the Lansing-based Michigan Restaurant and Lodging Association.

Lidvall, a restaurant industry veteran who was named CEO of the BarFly company after it was bought out of bankruptcy, acknowledged those headwinds, but noted that employee morale at the restaurants has remained high despite all the uncertainty.

Like many other industries are experiencing, Lidvall pointed to supply chain "disruption" and the tight labor market as the most severe challenges the company faces now. On the former point, Lidvall said prices are creeping up for commodities and supplies, and the labor squeeze is particularly acute on the west side of the state near HopCat's base of operations.

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HopCat seeks a path forward after bankruptcy, plans to focus on its home state, metro Detroit - Crain's Detroit Business