Beloved Southern Fast Food Chain Files For Bankruptcy

If you've never lived in the South, you may not be familiar with Krystal, but it so happens that they are the nation's second-oldest fast food chain — only White Castle has seniority. And, just like White Castle, Krystal is famous for its small, square-patty sliders. Unfortunately for Krystal, Harold and Kumar never ventured down into the southern states for their slider fix, so Krystal was never immortalized in a cult movie. Nor do they have a successful line of frozen burgers such as White Castle has, so their product remains unavailable outside their home territory. Now, in this latest blow to a venerable brand, Krystal is filing for Chapter 11 bankruptcy. If the company doesn't make a quick recovery, Krystal may soon be ceding the fast-food slider field entirely to its northern rival.

A brief history of Krystal

According to its Funding Universe profile, the Krystal restaurant chain started in 1932 when textile businessman R.B. Davenport decided that the Great Depression would be a great time to start selling cheap eats to Chattanoogans. He took his inspiration (which is business-speak for blatant ripoff) from White Castle, which dated back to 1921, but avoided any conflict with the older chain by agreeing to stay below the Mason-Dixon line once he started opening new locations. That way, the two slider sellers would never have to compete head-to-head (or patty-to-patty). The name Krystal comes from a remark Davenport's wife made about the very first restaurant, admiring how "crystal clean" it was — although for some reason they decided to spell the word with a "k," either because that letter is more distinctive or because textile salesmen are poor spellers.

Fast-forward a few decades, and Krystal had kept up with the times, at first offering drive-in service a la Sonic and then converting to a standard fast-food dine-in/takeout counter-service operation. They expanded throughout the southeast, eventually covering the states of Alabama, Arkansas, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee. Although Krystal never achieved the same level of fame as did White Castle, they nevertheless adopted a strong Southern identity, claiming to be a favorite of both Elvis Presley and Dolly Parton and to have inspired the stage name of country singer Crystal Gayle (who at least reclaimed the proper spelling).

The real reason why Krystal went bankrupt

Krystal's bankruptcy court filing did not point to any one reason for their financial struggles, instead listing all of the usual causes: too many competitors, staffing difficulties, expensive leases, rising food costs, yada yada yada. Fast Company also speculates that Krystal's failure to join in the great Chicken Sandwich Wars of 2019/2020 may also have led to their decline, evidently not considering the Krystal Chik a serious competitor.

Perhaps the real reason Krystal has been struggling, however, could have been due to its over-reaching plans for an extensive brand "refresh" as detailed in Commercial Appeal. Although sales had evidently been on the upswing, perhaps due to popular promotions including all-you-can eat burgers and fries (via Restaurant Business), the cost of demolishing and rebuilding aging restaurants might have had Krystal biting off more than they could chew. AOL Finance reveals that Krystal is currently $50 to $100 million in debt, and has closed nearly 50 of its restaurants.

Krystal's previous bankruptcy filing

When it comes to bankruptcy court, this ain't Krystal's first rodeo. In December 1995 they filed for Chapter 11, citing the costs they'd incurred from settling a number of employee lawsuits resulting from unpaid overtime wages. While Krystal emerged from Chapter 11 some 16 months later, in April 1997, they were soon acquired by an investment company called Port Royal Holdings. This company was owned by a former Coca-Cola executive who wanted to re-energize the branding of the company he claimed as a "true southern icon." While he did his best, the company was sold once again in 2012, this time to the Atlanta-based Argonne Capital Group. As a result of this latest acquisition, Krystal closed its Chattanooga headquarters, abandoning its birthplace after over 80 years in order to relocate to the ATL (via the Chattanooga Times Free Press).

What comes next for Krystal?

The slider king of the south evidently considers itself to be down, but not out, as the Chattanooga Times Free Press has published a phone number for what the chain calls its Restructuring Information Hotline meant to provide updated information on the changes in store. Fast Company also speculates that there may still be hope for this venerable fast food chain, citing the earlier bankruptcy and subsequent recovery. AOL Finance reminds us of the human cost of Krystal's potential failure — not only does this mean the South may go slider-less, but there are also an estimated 6,500 jobs at stake throughout the region. For the sake of the entire Krystal family and the chain's numerous fans, we wish the company a speedy recovery and hope it will soon be back on its feet... or rather, resting on its buns.