Chain seeks bankruptcy protection
Sushi Zushi lawyer says firm can’t meet financial obligations
The majority owner of Sushi Zushi has put the company into bankruptcy, seeking Chapter 11 protection, amid an ongoing feud with the San Antonio restaurant chain’s founder.
A lawyer for Sushi Zushi of
Texas Inc. said in a court filing Friday that it can’t meet its financial obligations due to legal costs, expenses associated with restaurant closures and high-interest loans it obtained to fund shortfalls.
Sushi Zushi had hired an investment bank to explore options for the chain, including a possible sale, but the lawyer said a lawsuit brought by chain founder Alfonso Tomita ended all discussions and any letters of intent the company had in place.
Tomita’s Strategenic Management
LLC has accused managers he brought in to operate the chain of misappropriating millions of dollars from the business. The lawsuit, filed in December, names Sushi Zushi of Texas, Alamo SZ LLC and its controlling principal, Jason Kemp, as defendants. Alamo SZ owns 82% of the debtor, while Strategenic owns the remaining 18%.
In late March, Sushi Zushi of Texas filed its own lawsuit against Tomita. It has alleged that he continued to receive pay after his employment ended in March. It seeks to collect more than $250,000, but no more than $1 million, from him.
Sushi Zushi had seven locations but is down to three. They are in Lincoln Heights, Stone Oak and the Colonnade. It has 125 employees.
Its bankruptcy reported $736,409 in assets and $3.9 million in liabilities as of late last year.
Ronald Smeberg, Sushi Zushi of Texas’ bankruptcy lawyer, said in the Friday court filing that the company is seeking bankruptcy protection to “stabilize its cash outflows and prioritize its employees, landlords and vendors.”
He said Tomita brought in new partners in 2018 to “turn the company around” after experiencing “operational and financial difficulty.”
“The company has incurred an enormous amount of debt, both (from the) business and the founder personally, which the company could not service,”
Smeberg added.
In his lawsuit, Tomita said he launched Sushi Zushi in 2001 and partnered with one of Kemp’s companies in hopes the chain “could flourish and expand to even more locations.”
The COVID-19 pandemic dealt “a severe blow” to the chain’s sales in 2020, Smeberg said. The opening of Blue Sushi in Austin caused nearly $500,000 in losses for Sushi Zushi’s location there. It later closed
its Austin and Dallas restaurants after racking up losses at those locations.
A meeting of the owners in 2022 led Sushi Zushi to obtain “merchant cash advances,” Smeberg said. Such advances generally are applied against future sales.
The company was sued numerous times last year, including by landlords, its former seafood distributor and Tomita.
Among the largest unsecured creditors listed in the bankruptcy petition are Coppell-based Asian food distributor JFC International, which is owed
about $302,500, and Sysco Central Texas Inc. of New Braunfels, owed about $248,500.
Various emergency motions, including to pay employees and other expenses, are scheduled to be heard Thursday in U.S. Bankruptcy Judge Michael Parker’s court. Kemp, who signed the bankruptcy papers, filed the Chapter 11 petition under a subchapter of the bankruptcy code designed for small-business debtors.
Separately, Kemp and two business partners have been defending
themselves in a lawsuit accusing them of using two now-bankrupt San Antonio restaurant companies — Fresh Acquisitions LLC and Buffets LLC — as their “personal piggy banks” while misusing millions of dollars in COVID-19 relief funds. The three men have denied the allegations.
In February, a bankruptcy judge in Dallas sanctioned the three men and other defendants, ordering them to pay more than $50,000 for failing to produce documents responsive to the discovery in the litigation.