Welcome back to the Deep Dive. I've been looking
forward to this one because, frankly, looking
at the stack of research you sent over, this
one feels personal. We're tackling a topic today
that is technically a business case study, a
very grim one. But for a specific generation,
this is a sensory memory. It's a smell. It's
a specific taste. It really is. It is one of
those rare business stories that you can actually
smell the moment you start talking about it.
Exactly. You walk in, say... 1996. You push open
those heavy glass doors and you are immediately
hit with that wall of savory roasted air. Oh,
yeah. It's warm. It smells like herbs and poultry
fat. You look behind the counter and you see
rows and rows of golden chickens spinning on
those spits. The rotisserie. The heartbeat of
the operation. The rotisserie. And then you look
at the sides. The mashed potatoes with that little
indented pool of gravy in the middle. The mac
and cheese that was always impossibly creamy
-like, scientifically creamy. It had to be, yeah.
The creamed spinach and, of course, the cornbread.
Which was basically cake, let's be honest with
ourselves here. It was absolutely cake and it
was delicious. We are, of course, talking about
Boston Market. Or, if your memory goes back just
a little further, Boston Chicken. A brand that
went from being the absolute... darling of Wall
Street, the rocket ship of the 90s to a company
that as of late 2024 has essentially ceased to
exist in the physical world. It is a shocking
decline. I mean, usually these big chains fade
away slowly. They consolidate, they shrink, but
they, you know, hang around. Right. There are
still a few locations left here or there. Looking
at the data here, this isn't just a story about
a restaurant getting less popular. This is a
story of a total species extinction. We're talking
about a brand that had over 1 ,200 locations
at its peak, and now. It's staggering. We're
looking at fewer than 30 locations left in the
entire United States. It is a statistical wipeout.
And what makes this deep dive so interesting,
and frankly a bit dark, is that the collapse
happens in phases that are almost perfect lessons
in what not to do in business. You have the Icarus
phase in the 90s. flying too close to the sun
with debt, and then you have the zombie phase,
which ends in what I can only describe as total
corporate anarchy. Anarchy is a strong word,
but looking at these court documents, the Gossamer
defense, the stop work orders, it fits. It really
does. It does. So our mission today is to trace
this arc. We need to understand the financial
engineering that built the empire, the identity
crisis that confused it, and the mismanagement.
Newton, Massachusetts. Newton is a suburb just
outside of Boston, a fairly affluent area. And
to understand why Boston chicken, as it was called
then, was such a big deal, you have to look at
the landscape of American dining in 1985. Okay.
It's hard to imagine now because we are just
drowning in options. But back then, the dichotomy
was very strict. Right. You had fast food, burgers,
fries, grease, paper wrappers. Speed was the
priority. Health was not even a consideration.
Yeah. Exactly. And on the other side, you had
sit -down restaurants, tablecloths, tipping,
a 90 -minute commitment. A whole evening. Right.
There was a massive gap in the middle. The term
fast casual simply didn't exist. Panera didn't
exist. Chipotle didn't exist. So Stephen Colo
and Arthur Kors, the founders, they weren't just
opening a chicken shack. They were stumbling
onto a new category entirely. They identified
what the industry now calls home meal replacement,
or HMR. The sociological timing was perfect.
You have to look at the demographics of the mid
80s. Right. You had a massive increase in dual
income households. Moms were entering the workforce
in record numbers. So both parents are working.
They come home at 6 p .m. They are exhausted.
The kids are hungry. Precisely. They don't want
to. I mean, who has the energy for a roast chicken
on a Tuesday? But they also feel a tremendous
amount of guilt about feeding their kids a bucket
of deep fried chicken or a burger. Of course.
They want something that looks and feels like
a Sunday dinner, but with the speed of a drive
-thru. So Boston chicken offers the absolution
of guilt. It's rotisserie. It's healthy, or at
least because it's not fried, we tell ourselves
it's healthy. Right, it feels healthier. It's
plated like a real meal with vegetables and cornbread.
It was the perfect product for that specific
moment in American culture. And the concept worked.
It worked so well that when they decided to scale,
they didn't just grow, they exploded. And this
brings us to the first major technical insight
of this case study, the financing of the expansion.
I was reading through the financials and the
notes, and it looks complicated. It feels like
a house of cards. They weren't just selling chicken
to make money. They were selling the idea of
selling chicken. That's a great way to put it.
In the early 90s, the company came under the
leadership of George Nedaf, who, by the way,
is a legend in this space. Okay. He's the guy
who actually discovered the original Kentucky
Fried Chicken concept and helped expand it. He
saw Boston Chicken and thought, I can do it again.
Okay, so they have the pedigree. But how do you
fund opening a thousand stores in just a few
years? That requires an enormous amount of capital.
Well, they used a very aggressive franchising
model. But it wasn't standard franchising. What
do you mean? In a normal franchise agreement,
you, the franchisee, go to a bank, take out a
loan, build the store, and pay the parent company
a royalty. Right. The parent company takes very
little risk. They're just collecting a check.
Exactly. But Boston Chicken wanted speed. They
wanted to capture the market before anyone else
could copy the rotisserie concept. So they set
up a system where they would lend money to the
franchisees to open the store. They would lend
the money. They created a separate entity to
finance these franchise partners. Wait, hold
on. So Boston Chicken records revenue from development
fees and royalties from the franchisees. But
those fees are being paid for by loans that Boston
Chicken effectively guaranteed or facilitated?
That sounds like a circular revenue stream. They
are lending money to people to pay themselves
fees, which they then book as revenue, to show
Wall Street growth, to raise more money, to lend
to more franchisees. You've got it. It's a loop.
And on a quarterly report, it looks fantastic
because the revenue line is skyrocketing. Wow.
They opened 500 stores in barely two years. The
stock price was soaring. People called it the
rocket ship. Right. But the fundamental cash
flow, the actual profit from selling drumsticks
and cream spinach, wasn't necessarily supporting
that level of debt service. This reminds me a
bit of the dot -com bubble or even the subprime
mortgage crisis on a micro scale. If the underlying
asset... The chicken sales slows down even a
little bit. The whole debt structure collapses
because the new loans stop coming in. And that's
exactly what happened. But before the crash,
they tried to innovate their way out of the corner
they painted themselves into. Okay. They realized
that while they had built a massive footprint,
they had a problem with the product itself. The
chicken problem. Yes. This is where we get the
1995 pivot. The name change. From Boston Chicken
to Boston Market. It seems subtle. But looking
back, it feels like a desperate move to widen
the net. Well, they hit what we call a usage
barrier. A usage barrier. Yeah. If a family of
four is deciding on dinner and three want chicken
but one hates chicken, the Boston chicken name
is a veto. You don't go. Ah, the veto vote. Veto
vote. You go somewhere with a broader menu. So
they had to become a market. They need to offer
everything. Exactly. So February 1995, they decide
to expand the menu significantly. They add turkey,
meatloaf. And ham. The meatloaf. I forgot about
the meatloaf. It was actually pretty good in
a, you know, cafeteria kind of way. It was iconic
for a while. But think about the operational
complexity they just added. Yeah. Cooking a rotisserie
chicken is one process. It spins, it cooks, you
take it off. Now you are managing supply chains
for turkey, ham, and meatloaf. You are managing
prep for all these different proteins, plus the
sides, all in a kitchen originally designed just
for chicken. Sounds like a nightmare. And the
branding followed the menu. In fall of 1995,
they officially changed the signs to Boston Market.
Right. The logic was. We are a market now. We
have options. But here is a fun little detail
from the corporate filings. Okay. Even though
they changed the signs on the door to Boston
Market in 95, the corporate entity was still
called Boston Chicken Inc. until 1997. So the
paperwork couldn't keep up with the marketing
department. Not at all. And this era, the mid
-90s, was really the peak of their throw -everything
-at -the -wall strategy. They weren't just adding
meats. They were trying to capture the lunch
crowd, too. Because a half chicken with two sides
is a heavy... lunch. It is. You need a nap after
that. It's not a power lunch, no. So in 1996,
they launched the Boston Carver sandwiches. Chicken,
turkey, ham, meatloaf, all in sandwich form.
I remember the ads for these. They were pushing
them hard. And then because it was the 90s and
everything had to be bigger and bolder. In 1997,
the Extreme Carver sandwiches. Extreme. Nothing
dates a product to the late 90s faster than the
word extreme. Did it come with a Mountain Dew?
It might as well have. It was... Larger portions
of meat and cheese. Yeah. They were trying to
compete with the sub shops and the delis. They
wanted to be your dinner spot, your lunch spot.
Yeah. And did you catch the bagel part in the
notes? I did. This actually blew my mind. I had
no idea. Boston Chicken was responsible for Einstein
Bros. Bagels. Yeah. That feels like a glitch
in the simulation. It's a forgotten chapter.
In 1995, they acquired three smaller bagel chains.
Noah's Bagel and Bagel and Brackman Brothers,
and rolled them up into Einstein Bros. So they
created the Einstein Bros brand. Essentially,
yes. The strategy was share of stomach. They
wanted you for breakfast with bagels, lunch with
sandwiches, and dinner with chicken. It sounds
ambitious, but looking at it now, it looks incredibly
unfocused. That's a good way to put it. You are
running a massive debt load. Your core business
is facing saturation. And instead of perfecting
the chicken operations, you were trying to learn
the bagel business. From scratch. It was classic
corporate hubris. They thought they had the magic
touch. But gravity always wins. And math always
wins. Right. By 1998, the debt bubble burst.
The interest payments on all those loans exceeded
the cash flow from operations. The circular financing
stopped working because they couldn't open new
stores fast enough to pay for the old ones. And
that led to the first big crash. Chapter 11 bankruptcy
filed in 1998. They closed many stores. The stock,
which had been a darling of Wall Street, collapsed.
It was a humiliating fall. OK, so let's pause
on Chapter 11. For the listener, this doesn't
mean the company dies immediately, right? It's
not a funeral yet. Right. Chapter 11 is reorganization.
It shields you from creditors while you try to
restructure your debts. It's different from Chapter
7, which is liquidation, selling everything and
turning off the lights. Boston Market thought
they could restructure, but they ended up getting
bought. And the buyer is the most confusing part
of this entire timeline for me. May 2000, McDonald's.
The Golden Arches. Why? I mean, McDonald's is
burgers and fries. It's assembly line speed.
Boston Market is slow roasted home style food.
Operationally, they are opposites. Was McDonald's
trying to get into the rotisserie game? Not really.
No. If you look at the acquisition analysis from
that time, it wasn't about the food. What was
it about? It was a real estate play. Ah. Location,
location, location. Think back to that aggressive
expansion in the early 90s. All those loans.
Exactly. Because they had so much cash from the
loans, Boston Market paid... top dollar for premium
corner locations in high traffic suburbs. They
owned the leases on some of the best dirt in
America. So McDonald's looked at the map and
saw 1 ,000 prime locations. Exactly. They figured
we can buy the whole company, take the best locations
and convert them into McDonald's restaurants
and figure out what to do with the rest later.
It was a land bank acquisition. But they didn't
convert them all immediately. They kept the brand
running. No. And this is where it gets interesting.
McDonald's is a very disciplined operator. They
are the masters of efficiency. They actually
stabilized the Boston Market brand for a while.
They cleaned up the operations. They streamlined
the kitchens. They kept it running. They even
tried to take it international. I saw on the
notes they went to Australia. They did. Nine
stores in Sydney between 2002 and 2004. I'm trying
to picture a Boston Market in Sydney. Did they
serve the cornbread? Did they? Have the meatloaf.
They tried to replicate the menu, but it failed.
Competitive pressures was the official reason.
But the rumor is that the Australian palate just
didn't resonate with the very American style
of comfort sides. Too heavy. It was too heavy,
perhaps. Yeah. And true to form, when they closed
the Sydney -Boston markets, what did they become?
McDonald's. The real estate strategy in action.
Of course. So McDonald's holds them for seven
years. They stabilize it, but they don't really
grow it. Eventually, McDonald's decides we don't
want to run a rotisserie chain anymore. So in
2007, they sell to Sun Capital Partners. Enter
the private equity era. Now, generally, when
I hear private equity buys a restaurant chain,
I assume two things are about to happen. Cost
cutting and asset stripping. That's the playbook.
What was the Sun Capital era like? It was surprisingly
long. They held it from 2007 to 2020. That's
an eternity in PE years. It really is. Usually
it's a three to five year flip. Buy it, cut costs,
make the numbers look good, sell it. Sun Capital
tried to make it work, but they suffered from
a massive identity crisis. They spent a decade
trying to find a reason for people to come back.
I remember seeing ads for ribs during this time.
Yes. In 2013, they opened their first new location
in seven years, trying to restart growth. By
2015, they added ribs. In 2018, they tried rotisserie
prime rib. Prime rib. At a drive -thru speed
place, that feels ambitious and risky. It was
desperate. They were throwing things at the wall
to see what stuck. They even did baby back ribs
with sweet baby ray sauce in 2020. Wow. But while
they were tinkering with the menu inside the
restaurant, something else was happening that
would eventually hurt the restaurant significantly.
The grocery store pivot. This is a crucial distinction
for the listener. If you see a Boston Market
frozen lasagna or chicken pot pie in the supermarket
today, that has nothing to do with the failing
restaurants. Wait, really? Because the logo is
exactly the same? The font is the same? The branding
is identical, but the rights to the frozen food
brand were sold off. They are now owned by a
company called Belizio Foods. They are a massive
conglomerate that makes frozen foods for lots
of brands. So the brand Boston Market has bifurcated.
You have the zombie restaurant chain and you
have the thriving frozen food brand. Exactly.
And in a cruel twist of irony, the success of
the frozen food actually helped kill the restaurant.
It tells a substitution. Yeah. If you want the
taste, you can just get it at home. Think about
it. If you have a craving for the taste of Boston
Market, that specific spice blend, that gravy.
You can get it for $3 .50 in the freezer aisle
at Kroger. Right. Or you can drive to the restaurant,
park, wait in line, and pay $12. Plus, the grocery
stores themselves changed. Costco, Whole Foods,
Kroger, they all started installing their own
massive rotisserie ovens. The famous $4 .99 set
Costco chicken. Ah, the death knell. That is
a loss leader. Costco loses money on every chicken
just to get you in the door to buy a TV. Boston
Market, whose entire business model was selling
chicken for a profit, couldn't compete with someone
selling it for a loss. So they were getting squeezed
from the freezer aisle by their own brand name
and from the deli counter by cheaper, more convenient
options. By 2019, Sun Capital closed 45 locations.
And in their press release, they explicitly blamed
grocery store competition. They admitted the
supermarket had beaten them. Before we move to
the final collapse, I want to take a detour into
the legal weeds. The outline mentions a trademark
war With Boston Pizza. Yes. This feels like a
subplot from a sitcom, but it apparently had
real consequences. It's a fascinating case study
in international IP law. So you have Boston Market
in the U .S., and in Canada, there is a massive
casual dining chain called Boston Pizza. Which
I assume has nothing to do with the city of Boston.
Very little. It was founded in Edmonton by a
Greek immigrant. But in 2002, when Boston Market
tried to expand into Canada, Boston Pizza sued
them. Because they used the word Boston. Essentially.
They claimed their trademark on Boston pizza
gave them rights to the word Boston in the context
of restaurants in Canada. That seems wild. It's
a major American city. Can you trademark a city?
Well, no, not usually. Can I open a restaurant
called New York Tacos and sue anyone else who
uses New York? Generally, no. And that was Boston
Market's defense. They argued the term was descriptive,
not distinctive. They said, look, Boston pizza
just describes the style of pizza. It's not a
unique brand identifier. But is Boston style
pizza a thing? I'm from the East Coast and I've
never heard of it. I know New York style, Chicago
style, Detroit style. Legally, it didn't matter.
Boston Pizza had the market dominance in Canada.
They fought for years. And in 2008, they settled.
And the terms were humiliating for Boston Market.
What were the terms? Boston Market agreed not
to use the words Boston or Boston Market for
any restaurants in Canada for five years. So
if they wanted to open a store, they'd have to
call it... Newton Market. Or just the Marchet.
Or Chicken Market. It effectively killed their
ability to expand north of the border. Wow. It's
a reminder that a brand is only as strong as
its legal protection in the specific jurisdiction
you are operating in. You might be a giant in
the U .S., but in Canada, you might be infringing
on a pizza place from Edmonton. That is wild.
Okay, let's fast forward. We move past the trademark
wars. We are in 2020. The world is changing.
The pandemic hits and Boston Market changes hands
again. This is the turning point. This is where
the story shifts from struggling brand to disaster.
April 2020, Sun Capital finally offloads the
brand. They sell it to Engage Brands, LLC. Which
is part of the Rohan Group, owned by a businessman
named Jignish J. Pandya. Now, usually when a
new owner comes in, there is a honeymoon period,
maybe some investment, a new coat of paint. What
happened here? The exact opposite. Buying a buffet
-style restaurant chain at the start of a respiratory
pandemic seems like a contrarian bet, sure. A
bit, yeah. But the issue wasn't the pandemic.
The issue was the operating strategy. Almost
immediately, the reports started coming in that
Boston Market simply stopped paying its bills.
And when you say stopped paying, do you mean
they were late? Net 90 instead of net 30? No.
I mean, they just stopped paying almost everyone.
Total nonpayment. Who is everyone? Suppliers,
landlords, employees. It was a complete financial
tailspin. Let's start with the suppliers. You
can't run a chicken restaurant without chicken.
Correct. And U .S. Foods, one of the biggest
food distributors in the country, sued them.
This was the big lawsuit. July 2023. U .S. Foods
filed a suit claiming Boston Market owed them
$11 .3 million in unpaid food bills. $11 million.
That is a mountain of mashed potatoes. How do
you rack up an $11 million tab without someone
cutting you off sooner? That is a valid question.
But what's incredible is the legal defense or
the lack thereof. Okay. When this went to court,
the judge, Judge Manish Shah, had a very specific
word for Boston Market's defense. I have it right
here. He called their defenses gossamer. It's
a beautiful word. It is. It refers to something
very light, thin, and insubstantial, like a spider
web or a fine fabric. But not a word you want
to hear from a federal judge regarding your legal
argument. No. He was basically saying their defense
was made of thin air. They didn't dispute that
they received the food. They didn't dispute the
price. They just hadn't paid. So they lost that
lawsuit in February 2024. U .S. Foods won the
$11 .3 million judgment. Yes. But by then, the
damage was done. And it wasn't just the food.
It was the roofs over their heads. The landlords.
We saw evictions popping up all over the country.
In Danbury, Connecticut, the landlords sued for
over $61 ,000 in unpaid rent. Evicted. In Detroit.
In November 2023, all Detroit area locations
were permanently shuttered. Evicted. In Connecticut
again. The whole state. All eight remaining locations
in the entire state of Connecticut closed and
evicted in November 2023. It's like a domino
effect. But the part that really gets me, the
part that makes this more than just a business
story, is the labor crisis. This is where it
gets tragic. It's one thing to stiff a giant
corporation like U .S. Foods. They have insurance.
They have lawyers. Right. It's another thing
to stiff the person serving the mac and cheese
who is making minimum wage. In New Jersey, the
Department of Labor actually stepped in. August
2023, the NJ Department of Labor issued stop
work orders at 27 of the 31 Boston Market locations
in the state. Wait, explain the stop work order
to me. That sounds intense. That sounds like
something you do to a construction site that's
about to collapse. It is the nuclear option for
a regulator. Usually, if a business violates
labor laws, they get fined. They get a warning.
But a stop work order means the state sends agents
or police to physically shut the business down.
They lock the doors. You cannot operate. And
why did they do this? Because the violations
were so severe. They found Boston Market owed
back pay of up to $607 ,471 to 314 employees.
$600 ,000 in unpaid wages. Yes. That is people's
rent. That's groceries. That's car payments.
Exactly. An employee in Mercer County had filed
a complaint back in November 2022 saying they
hadn't been paid. That triggered the investigation.
They found a pattern of failure to pay workers
across the entire state. And it wasn't just New
Jersey. No. Massachusetts in November 2023. Same
story. Failure to pay workers. The state fined
them heavily. So picture this. You have no food
coming in because you aren't paying U .S. foods.
You have no buildings because you aren't paying
the landlords. And you have no staff because
you aren't paying the workers and the state has
shut you down. It is the definition of a collapse,
a total systemic failure. And the numbers reflect
that velocity. Let's look at the store count
freefall. Start of 2023. About 300 locations.
End of 2023. About 79 locations. And end of 2024.
16. 16. From over 1 ,000 in the 90s to 16. That
is basically a rounding error compared to where
they were. It is stunning. And amidst this collapse,
the leadership was trying some bizarre maneuvers.
The franchise for free, Hail Mary. Yes. On January
10th, 2024, the company announced that anyone,
literally anyone, could open a franchise without
the usual fees or buy -in requirements. It sounds
like a desperation move, like a late -night infomercial.
Call now and get your own Boston Market. It was.
They were basically giving the brand away to
try and keep the name alive. But think about
it from a business perspective. Who would sign
up for that? No one. Who would sign a contract
with a parent company that is currently being
sued by every major vendor in the country and
has been evicted from entire states? It's a liability,
not an asset. Exactly. And speaking of liabilities,
the bankruptcy saga is confusing. They filed.
Then they didn't. It was a merry -go -round.
In December 2023, Pangea and Boston Market filed
for Chapter 11. Okay, standard procedure for
a failing company. But in January 2024, the court
dismissed it. Why? Because the company was unresponsive
to the court. They just didn't reply to requests
for documents and information. They ghosted the
bankruptcy court. Essentially. Then, in February
2024, right after losing the U .S. Foods lawsuit,
they filed for bankruptcy again. Third time's
the charm. Apparently not. In September 2024,
a judge dismissed their appeal regarding the
U .S. Foods judgment, and the language the judge
used was scathing. Quote, bad faith, delay tactics,
and willful disregard. When a federal judge says
you are acting in bad faith, you are in deep
trouble. It means they believe you are abusing
the legal system to delay the inevitable. And
yet, and this is the wildest part to me, amidst
all this domestic destruction, there's a dot
on the map on the other side of the world. The
India paradox. While the U .S. chain is collapsing
to fewer than 20 stores. They reportedly opened
a new location in India in early 2024. It defies
logic. You cannot pay your workers in New Jersey,
but you are cutting ribbons in New Delhi. What
does that even mean? It speaks to the chaotic
nature of the management during this period.
It implies that maybe the brand asset still has
value somewhere, even if the operational reality
in the U .S. is utter ruin. So what does this
all mean? We have gone from the sensory joy of
rotisserie chicken in Newton, Massachusetts,
to gossamer legal defenses and stop work orders.
I think the lesson here is about the fragility
of legacy. We assume brands like a Boston Market
are permanent fixtures they feel like part of
the landscape they're just there but they are
just collections of contracts cash flows and
trust trust seems to be the key word it is if
you leverage the company too high with debt like
they did in the 90s you break trust with the
future if you strip the assets like in the private
equity era you break trust with the customer
and if you simply stop paying your bills like
in the final era you break trust with everyone
your lenders your landlords and your Once you
break that trust, no amount of cornbread can
fix it. Well said. So here is our final thought
for you to chew on. Next time you're in the frozen
food aisle and you see that red and white Boston
Market box. Which is owned by Belizio Foods,
remember. Right. When you see that box, would
you just see a quick dinner? Or would you see
the ghost of an empire? An empire that once had
1 ,200 restaurants, convinced McDonald's to buy
it, and tried to trademark the name of a major
city. only to vanish into the ether of unpaid
bills and bad faith. It makes you wonder which
other permanent brands are just one bad ownership
change away from disappearing. A scary thought.
Yeah. Thanks for diving in with us. We'll see
you on the next one.