Jose Garces used to wage his battles in front of the cameras as an Iron Chef on Food Network. He usually prevailed.
Now, he is on the defensive in a fight with much larger stakes: the very future of his Philadelphia-based restaurant empire.
Faced with unpaid vendors, angry investors, and skittish bankers, Garces is said to be considering filing for bankruptcy protection for the companies that control at least some of his restaurants.
According to representatives of his creditors, Garces’ staff briefed key shareholders Thursday that such a bankruptcy filing was a possibility.
In an extensive interview Tuesday, Garces described himself as reeling from a series of “devastating” events that include the sudden closing of Revel Casino in 2014, idling four restaurants, and a brutal monetary drain associated with Amada restaurant in New York City, which finally closed last month.
His longtime partners, who have lawsuits pending against Garces, oppose any bankruptcy filing, saying they fear that it might leave them shortchanged, sources said. A Garces representative confirmed the shareholders meeting, but declined to provide any details.
In the interview at his Center City office Tuesday, Garces also lashed out at longtime investors Jim Sorkin and Tom and Maria Spinner, who he said have rejected offers to settle their grievances.
Sorkin is a principal in a major Philadelphia food-distribution company, and his firm sued Garces earlier this month, contending that it was owed $848,000. The Spinners have sued, too, claiming Garces had cut them out of profits.
Garces rejected those claims. “Greed has prevented the company from moving forward in a timely fashion,” he said.
Jason Spiro, an attorney for the Spinner family, said he had no comment. William Harvey, who represents Sorkin and his business, Julius Silvert Inc., also declined to comment.
Garces conceded that the future is cloudy for his Garces Group, which began 13 years ago in Old City with Amada, his splashy Spanish restaurant on Chestnut Street near Second. Sorkin and the Spinners joined with Garces to launch Amada, putting up $100,000 each, while Garces secured a $800,000 small-business loan.
In addition to the lawsuits from Sorkin, the Spinners, and others, M&T Bank, based in Buffalo — which holds a $7 million note on Garces’ Bucks County farmhouse — last year installed a “chief restructuring officer” to oversee operations for Garces, after ousting much of the chef’s brain trust.
In the interview, Garces made it plain that he hopes for a fresh infusion of cash that would leave him with some degree of ownership. But he would not rule out selling his ownership stake or a bankruptcy filing.
Garces said he was exploring “several different paths with different partners” for the company, which now has its name on 13 restaurants plus a catering division. Among his possible partners, he confirmed, is a Louisiana restaurant company, Ballard Hospitality, that operates PJ’s Coffee, among other places. Ballard executives have not returned numerous messages seeking comment.
In a relentless pattern, Garces has opened as many as 30 restaurants across the nation since 2005, of which he still is affiliated with perhaps half. In the interview, he said he still planned to open restaurants at the new Ocean Casino in Atlantic City — due this summer in the old Revel building — and one new restaurant in New Hope. He noted that all would be management deals that do not require a capital investment.
Despite the uncertainty, Garces is bullish on the work of his 750-plus employees. “All along, the company and our hospitality professionals are performing to the best that they can,” he said. “And we notice no customer drop-off, no poor ratings in service, no food-quality issues.
“I want to make sure that that is out there, because that’s really important. Whatever’s been happening behind the scenes, we’ve worked really hard to continue to present a great product out there.”
Garces Group rode high for nearly a decade, turning out such hits as Village Whiskey and Tinto, as Garces’ own star rose. Along the way came countless opportunities, mainly from developers eager to tout the Garces brand. “It’s just people love what I do,” Garces said.
Through the years, Garces has alternated between opening and operating his own restaurants, such as the Olde Bar, Volver, Garces Trading Co., JG Domestic, and Buena Onda, all in Philadelphia, or managing or licensing his name to others, such as Ortzi in New York City and a collection of restaurants in Arizona and California resorts.
After growing up in the Chicago area and moving to New York, Garces, 45, arrived in Philadelphia in 2000 as executive chef at the opening of Alma de Cuba, a Latin restaurant near Rittenhouse Square owned by Stephen Starr. In 2005, he assumed the same title at Starr’s El Vez at its opening in Washington Square West before he left to open Amada later that year.
Today, Garces describes himself not only as a chef, but also the company’s “visionary, and the brand ambassador.”
Garces said the financial woes began in 2014 with the sudden closing of the Revel. With the shutdown came the loss of $2.5 million in annual earnings from its four restaurants, he said.
He suffered another setback later when the Amada restaurant in Lower Manhattan bled money from its start. According to Garces, that Amada faced a $1 million construction overrun and staggering annual operational losses.
A third blow came in late 2016, when M&T Bank issued what Garces called a “nonmonetary default notice.” Though Garces maintained that his company never missed a payment, the bank believed that the company’s finances were shaky, based largely on the lost cash flow from the Revel restaurants, he said.
Still, asked if he had overextended himself, Garces said: “I think that we grew really fast and we were very excited to do that. I think that from the creative standpoint, and as far as concept development, we were able to keep up.”
That said, Garces added: “I don’t think that maybe our back office was in line to really keep up with the demanding growth.”
The Spinners claimed in court papers this year that Garces had renegotiated a massive amount of debt without their knowledge in 2014 — putting up restaurants as collateral. They also said he had improperly ended cash distributions to them.
The Spinners’ suit says Garces’ “wrongful actions” amount to “a massive, self-interested and continuing fraud — in substance and operation a Ponzi scheme — at the expense of his investors.”
Garces rejected the criticism, insisting that his investors were fully aware of his debt renegotiations. He also said the Spinners, as well as Sorkin, had been repaid, “probably two or maybe like five times over” for their investments.
In the most sweeping lawsuit filed by a food vendor, Sorkin’s company — Julius Silvert Inc. — contends that Garces fell into debt and then reneged on an agreement to repay $848,000. After Garces initially promised to make the payments, Sorkin’s firm continued to deliver food for nearly a year, even though Garces’ firm “did not make any payments,” the suit says.
Finally last summer, Sorkin cut off the food. His firm went into court against the chef on April 16.
Garces said the debt to Silvert needed to be put into perspective. His restaurants and catering company, he said, bought more than $120 million in food from Sorkin over the last decade — as much as $900,000 a month.
While Garces said he had a harmonious relationship for years with Sorkin, he said that at some point his managers began raising questions about Silvert’s prices, saying they were inflated by as much as 20 percent. “I confront Jim and he gives me his word that that’s not true, that’s not happening, and we move on,” Garces said.
Nonetheless, Garces said he had begun to think that that the pricing was affecting the company’s operation. He said he went back to Sorkin, who refused to reduce his prices.
While Sorkin maintains in his suit that his firm cut off deliveries to Garces, the chef said it was choice to stop doing business with Sorkin.
His move to switch vendors, Garces said, “sets off anger and this whole litigious kind of behavior that’s been going on. I’m pretty sure if we were still buying from him right now, there wouldn’t be a suit.”
Garces said he wants to make Sorkin and other creditors whole.
“We have every intention to pay him back, get him as whole as possible once we were able to recapitalize and restructure,” he said. “That was our goal, that was our intention, and that continues to be our intention.”