To buy itself time after a dispute with a landlord, a longstanding Richmond sandwich shop has filed bankruptcy.
Padow’s Hams and Deli, which opened its first location in the Willow Lawn shopping center in 1988, filed for Chapter 11 bankruptcy protection in mid-November.
Padow’s president Sidney Padow said the company made the filing after falling behind on rent at the Willow Lawn location.
“It got to a point where we couldn’t afford the payments anymore,” Padow said. “We asked the landlord for some concessions, and we were basically told pay up or get out.”
Federal Realty Investment Trust owns the West End shopping center. Padow’s owes the Maryland-based company $154,543, according to the bankruptcy filing.
Federal Realty could not be reached for comment by press time.
Padow said the company hasn’t had any issues with its seven other Central Virginia locations. All eight locations will remain open during the bankruptcy process.
He said the dispute with Federal Realty dates back years. In 2010, the deli filed a lawsuit against Federal Realty for allegedly violating a provision of its lease agreement that prevented the landlord from leasing space to what Padow’s considers competitors: in this case, Five Guys and Qdoba restaurants. The suit was settled out of court.
Padow said rent for the Willow Lawn space is more than $9,000 per month, accounting for about 25 percent of the store’s monthly sales. On top of late fees and other penalties, Padow said it’s almost impossible for the deli to keep up with payments.
“We’re working hard, trying to keep our prices low,” Padow said. “That store used to be slamming, but sales aren’t what they used to be. It’s the same story for a lot of people in the restaurant industry.”
In its filing, the deli lists $339,000 in assets and $1.42 million in liabilities, with more than 50 creditors. A sister company, Padow’s Deli Inc., simultaneously filed for Chapter 11. That entity has only a few hundred dollars in assets, and the company has asked the court to combine to the two filings.
Padow said he hasn’t had problems with any of the company’s other creditors, which include Sledd Properties/Thahimers (its landlord at the West Broad Street location), Capital One and the Virginia Department of Taxation.
The deli is battling two disputed claims for debt: $80,000 owed the equipment rental firm Southern United Leasing and $14,000 owed to the Henrico County Department of Finance, bankruptcy records show.
Paula Beran, with the firm Tavenner and Beran, is representing Padow’s.
Although Padow expects a rush around the holidays, he said overall sales at the chain have dropped about 25 percent since 2008.
Two of the eight locations around Richmond – at Willow Lawn and at West Broad Street and Gaskins Road – are corporate owned by Padow’s. The other stores are franchises, a model it adopted in the mid-1990s.
The Padow family broke into the Richmond food business in 1936, when Sidney Padow’s father, George, opened a grocery store in Jackson Ward and made a reputation for quality hams.