High costs, interest rates hit Rick’s Dessert Diner. Owner plans to restructure finances.
Rick’s Dessert Diner, the J Street bakery popular for its rich pastries and late-night hours, will reorganize finances in the wake of rising costs and high interest rates. But the midtown institution will remain open and business will continue as usual, the owner said.
The diner’s parent company, Youssef Corporation, filed to initiate Chapter 11 bankruptcy proceedings this week in the Eastern District of California. Owner Randy Sutton said in an interview Friday that the filing is just a move to restructure the business’ finances, and customers won’t notice any changes.
“We’re not going to be slacking back or cutting corners,” he said. “We’ll continue to provide the very best product that we can possibly put out.”
Sutton said he bought the business two-and-a-half years ago after running a bakery in Dallas. Rick’s was a unique concept, and sales had been steadily rising.
And since he took over the business, revenues have continued to grow healthily.
But at the same time, expenses rose significantly. Interest rates climbed, as the Federal Reserve looked to tame pandemic-era inflation. Rent and worker’s compensation costs went up. Prices for eggs and chocolate rose about 50%, Sutton said. And the business had significant debt when Sutton acquired it.
Sutton said he weighed the business’ options carefully in 2024, and decided that Chapter 11 was the best way to resolve the diner’s financial challenges without raising prices for customers or cutting workers’ wages.
As to whether Sutton expects the bankruptcy process to lead to a sale, he said: “No, no. This is just reorganization.”
In the meantime, the business is making other changes that could lend a financial boost. Sutton added sandwiches to the menu soon after he bought the diner, and a few weeks ago he added danishes and breakfast sandwiches.
“Surprising to us, our sandwich business has really been booming at night, because where else can you get a sandwich at midnight?” Sutton said. “That was a pleasant side effect.”
Sutton said he thinks Rick’s offers a good product. It’s a fun place to spend time, and he wants to keep it that way.
The Chapter 11 process could be completed in the next six months. In the meantime, Sutton said, customers can continue to expect good service and good products.
“We don’t want our customers to be scared that we’re going to disappear.”
This story was originally published January 3, 2025 at 1:24 PM.
