Quick Lunch in the Courts

For the past year Childs Co., after more than 50 years of peddling sanitary flap jacks, "unsurpassed" coffee and (more recently) the 60-c- soup-to-nuts special, has been teetering on the verge of bankruptcy.

Last week three small creditors named Deerbon, Grizzle and Zinman came right out and asked the U.S. District Court in New York City to order its reorganization under Chapter X of the Federal Bank ruptcy Act. More important to the rest of Childs's creditors, they persuaded the judge to order an immediate injunction against any more of the petty lawsuits that have recently plagued the company -- and incidentally caused exotic fluctuations in Childs securities.

White Tile and Vegetarians. Childs has ridden out many another crisis. Founded in 1889, it got off to a fast start because Brothers Samuel and William Childs got aboard two great trends of the 20th Century: 1) the anti-germ wave (they insisted that cheap food should also be clean food); 2) the quick-lunch craze (when they went into business there was nothing but the free-lunch saloon between carrying your own lunch to work, or eating at a leisurely, expensive "continental" restaurant). Periodically Childs ran into stone walls -- as when wheatless, meatless days in World War I ate into its flapjack sales, and when the speakeasy era made its white-tiled, antiseptic restaurants look antediluvian to devotees of the intime hole in the wall.

Repeal put Childs back into the money -- but not before Founder William had almost ruined it. Distraught by his brother Samuel's death (in 1925) and by financial troubles, William took the cure at Battle Creek, Mich. There Dr. John Harvey Kellogg sold him on 1) a vegetarian diet, 2) the evils of drinking water at mealtime, 3) the evils of tobacco at any time. William tried to sell Childs customers on a similar Spartan bill of fare. General sales resistance finally roused hungry Childs stockholders to push him out of the company in 1929. Nine years later (in 1938) he died on his New Jersey estate.

Debentures and 60-c- Lunches. Chances are the Childs Co. will ride out its latest financial crisis too--but not without going through receivership for the first time. Last year the company tried to persuade its debenture holders to trade their $4,943,000 of bonds due this April for identical new ones due in 1957. Only some 60% of the debentures have been turned in on the offer, and the deadline is near. Childs plans to fight the bankruptcy action on the grounds that it is by no means insolvent, but, unless the other 40% turn in their bonds within the next week (or a lucky loan turns up), it will be forced into receivership anyway.

Childs, as a going concern, is worth a lot more than Childs as a bankrupt estate, to be parceled up among creditors. Its earnings for the first quarter of this year were $173,000, twice the net for the whole of 1942. But, bankrupt or no, Childs's 80 restaurants in the U.S. and Canada will probably still go right on serving the 60-c- special (plus cocktail) to millions of thirsty, hungry quick-lunchers.

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