Sticky’s Investor Defends Bid to Save NYC Chicken Restaurant

A key investor backing the reorganization of the New York-area casual dining chain Sticky’s Finger Joint defended the company’s revised Chapter 11 plan against a Justice Department bankruptcy watchdog objection, warning that the alternative is liquidation.

Harker Palmer Investors LLC said in a Tuesday filing in the US Bankruptcy Court for the District of Delaware that the US Trustee’s legal arguments are “unsupported” and that no creditors—including landlords and supplier US Foods—oppose the revised proposal.

The investor has offered $2 million in cash and the assumption of certain loans.

“If the Modified Plan is not confirmed, conversion to Chapter 7 will follow resulting in no recovery to any creditors,” the firm said in the filing. Chapter 7 would involve a trustee-supervised liquidation process.

The US Trustee objected to the inclusion of Harker Palmer as an “exculpated party,” which would provide certain legal protections. The bankruptcy monitor argued that the exculpation provision can only apply to estate fiduciaries in the Third Circuit, which oversees the Delaware court.

In response, Harker Palmer agreed to revise the exculpation provision so that it would only apply if the firm were sued on fiduciary grounds. This move is meant to address the US Trustee’s concerns, stopping short of conceding that broader protections for the firm would be impermissible.

The investor also pushed back on the US Trustee’s contention that all administrative claims must be paid in full as part of a reorganization plan under Subchapter V, which governs small business bankruptcies.

While the US Trustee leaned on the US Supreme Court’s 2017 Czyzewski v. Jevic Holding Corp. decision, Harker Palmer said that specific case was focused on structured dismissals, which doesn’t apply to Sticky’s case.

In February, Sticky’s said in a court filing that it was seeking to convert its Chapter 11 case into a Chapter 7 because of its inability to pay bankruptcy costs and to make promised creditor distributions as a result of insufficient cash flow.

The restaurant filed for Chapter 11 in April 2024, blaming reduced foot traffic from a post-pandemic work-from-home trend, as well as higher chicken and potato costs.

Sticky’s is among a slew of casual dining chains filing for bankruptcy. Hooters, Red Lobster, and On the Border are among other restaurant chains that have filed for bankruptcy in the past year. Restaurants that have filed for bankruptcy point to the Covid-19 pandemic as the source of their financial distress, as increased food costs coupled with changing consumer dining behavior complicate their ability to remain profitable.

To cover higher food and labor costs while maintaining pre-pandemic profit margins of around 5%, the average restaurant would need to increase their prices by 30.3%, according to data from the National Restaurant Association on how inflation is impacting restaurants.

A hearing to consider confirming Harker Palmer’s revised plan is scheduled for June 6.

Harker Palmer is represented by Troutman Pepper Locke LLP and Goodwin Procter LLP. Sticky’s is represented by Pashman Stein Walder Hayden PC.

The case is Sticky’s Holdings LLC, Bankr. D. Del., 24-bk-10856, response 6/3/25.