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Restaurant distributor COI files

Commissary Operations Inc., a Nashville-based foodservice distributor with nearly a half-billion dollars in revenue and customers such as Shoney's, Ryan's, Applebee's and Ruth's Chris Steak House, has filed for Chapter 11 bankruptcy.Citing rising fuel prices and the loss of one of its biggest customers, COI has debts in the $50 to $100 million range, including a $2.3 million debt to Ryder Trans Services in La Vergne.

ver the last several months, the company, which has 700 employees and has distribution centers in Nashville, Tifton, Ga., and Ripley, W. Va., has started to reduce the number of restaurants it serves to cut costs, according to the filing. Company officials declined to comment on the filing. Commissary Operations Inc. does business as COI Foodservice and also manufactures food products through a second Nashville division called Chairman's Choice Foods. According to the bankruptcy filing, COI lost a customer in March 2007 whose business had generated 18 percent of the company's revenues.

The company had revenues of $470 million in 2007, according to Business Journal research. In late 2007, COI obtained a large new account that more than replaced the volume of lost sales, however, the company had to invest substantial capital in early 2008 to service the new customer, according to the filing. Also this year, the company lost several million dollars when its customer Roadhouse Grill Inc. closed after filing Chapter 7 bankruptcy. Bankruptcy Attorney Susan Limor says there is a ripple effect in the bankruptcy courts when one company is dependent on another.

"If one customer is a large portion of a company's business they become economically intertwined with them," Limor says. "The more diverse your customer pool is, the better off you are." Amy Vinson, a restaurant analyst with Avondale Partners, says food, freight and gas costs are up in the industry and there is little profit margin. Vinson says regional distributors don't have a large enough customer base to dilute the particular impact any one customer can have. "That's where they can get into trouble," Vinson says. COI say it was further hurt by rising gas prices."The rise in fuel prices has been very detrimental to the (COI's) profitability," according to the filing.

The company is asking the court for control of its bank accounts to continue business operations.

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