K&W Cafeteria Inc., a Winston-Salem-based purveyor of Southern comfort foods for 85 years, has been sold for an undisclosed price to Louisiana-based restaurant chain Piccadilly.
Dax Allred, K&W’s president, said in a brief statement Tuesday that “after three generations of the Allred family operating K&W restaurants and serving our treasured guests, a new leadership group will continue the longstanding K&W tradition of serving homestyle, scratch-made food to our guests.”
Piccadilly has committed to keeping all 11 current K&W locations open, including the Winston-Salem restaurants at 800 E. Hanes Mill Road and 3300 Healy Drive.
Piccadilly could not be immediately reached for comment on when if it plans to rebrand the K&W locations and if there will be any immediate menu changes planned.
“All cafeteria team members will have the opportunity to remain onboard, so rest assured you’ll see the same smiling faces on the line, the kitchens and our dining rooms,” Allred said,
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“We can’t thank you enough for the years of loyal support, it has been a pleasure.”
Allred did not respond when asked about selling to Piccadilly and why now.
Piccadilly has 33 locations in the Southeast, though none in North Carolina.
Piccadilly, though, likely is a familiar brand in parts of North Carolina after it bought the Morrison Cafeterias chain in 1998.
Piccadilly went through its own Chapter 11 bankruptcy filings in 2003 and 2012, which reduced its locations from 270 to 41 when it emerged the second time in 2013.
The sale of K&W is not unexpected given it was listed as option, along with its assets being put up for auction, when the company filed for Chapter 11 bankruptcy protection in September 2020.
K&W had 18 restaurants open at the time of the bankruptcy filing, including three in Winston-Salem and 14 in North Carolina. K&W said it had 1,035 employees when it entered bankruptcy, but was down to 834 employees as of a December 2020 filing.
After six months of failing to find a buyer and unable to secure what the Allred family considered as an adequate bid for the assets, management reversed course in March 2021 and chose to keep 14 restaurants open.
A federal bankruptcy judge approved the final K&W reorganization plan in June 2021 and the company emerged from bankruptcy protection in September 2021.
Allred said when the reorganization plan was approved “although our geographic footprint has contracted, we look forward to operating K&W Cafeterias as a profitable, debt-free company going forward.”
In a related transaction, the K&W headquarters building in Winston-Salem was sold for $984,500 to a Winston-Salem group, according to a Forsyth County Register of Deeds filing Monday. The 1.17-acre property at 1391 Plaza West Road contains a 7,981-square-foot office building.
Part of the reorganization plan involved K&W committing to paying off largest creditor Truist Financial Corp. by July 1, 2022.
The K&W debt owed to Truist includes a $6.73 million Paycheck Protection Plan (PPP) loan and a $10.95 million lien claim on accounts, inventory, equipment, parts and general intangibles. The PPP loan to K&W was one of the largest granted to a North Carolina business.
Both K&W and Truist confirmed in the reorganization plan there had been forgiveness of the K&W PPP loan by the U.S. Small Business Administration.
The reorganization plan listed Truist with $7.77 million in secured claims against K&W. The sale of non-core K&W-owned properties would be the main mechanism for how Truist would be repaid.
Before K&W filed for bankruptcy, it closed in August 2020 restaurants in Chapel Hill, Goldsboro, Raleigh and Salisbury. It shuttered its experimental K&W Cafe in Clemmons in July 2019 and in High Point in January 2020.
Overall, since celebrating its 75th anniversary in 2012, K&W had shrunk from 35 restaurants to 18.
When K&W closed the two Triangle locations, Allred told the Raleigh News & Observer that its business dropped off about 80% during Phase One of the COVID-19 pandemic statewide restrictions, which lasted from March 10, 2020, through May 22, 2020.
Phase One permitted only takeout and delivery sales.
“These were difficult decisions, but they were the right business decisions,” Allred said in September 2020. “This enables us to refocus our team and refocus our resources on our 18 locations.”
Although Allred said K&W was able to regain some business during Phase Two, which allowed for limited indoor and outdoor service, it continued to struggle because its primary customers are elderly diners who have been advised to stay at home during the pandemic.
The company debuted in 1937 during the Great Depression with one restaurant on Cherry Street in downtown Winston-Salem.
Allred said in a 75th anniversary profile in the Journal in January 2012 that one of the keys to the company’s success is that it has stayed true to the guiding principle of its founder, Grady Allred Sr., who died in 1983:
“While trends come and go, good food at a reasonable price is never out of style,” he said.
Dax Allred said the company’s business model and offerings help it compete.
“We still prepare everything from scratch,” he said. “There’s no ‘heat and eat,’ as we like to call it, in our kitchens.”
Another reason K&W has survived for so many years is because of its loyal customer base. “They have made us what we are today,” Allred said.
He said some people eat at the restaurant on Healy Drive three times a day — at breakfast, lunch and dinner — every day.
Dax Allred said the most challenging time in the company’s history had to have been the explosion at its restaurant on Knollwood Street on Jan. 18, 1988.
The explosion, which happened about 2:30 a.m., leveled the K&W and injured three people. It also damaged the adjoining Sheraton Hotel, which had to be razed, and homes and businesses more than a mile away.
According to investigators, a spark from a boiler ignited a gas leak in the building’s basement. Piedmont Natural Gas Co. was blamed with failure to maintain the gas lines.