The small news item in this paper on Feb. 5 that the Salem-based parent company of McGrath’s Fish House had filed for bankruptcy masked a larger story behind the company and the role its Bend restaurant played in the company’s growth. In hindsight, some of that growth proved too burdensome after the economy collapsed, slamming key markets to which McGrath’s had expanded.

Faced with heavy debts on new restaurants in markets outside Oregon and a recession that cut business everywhere, McGrath’s filed Chapter 11 bankruptcy, which allows it to operate free of the threat of creditor lawsuits while it works to reorganize its finances and emerge leaner and healthier.

But back to Bend. It was here, in front of what is now Bend River Promenade, that company President John McGrath in 1986 opened his first free-standing fish house after a successful startup in Salem in 1980. The Salem restaurant was a small location, next to retailers, occupying the ground floor of a parking garage.

“I always like to think of Bend as what really got McGrath’s started the way it is,” McGrath said in a Nov. 24, 2006, story in The Bulletin. “The first one we did in Salem was just a little tiny space underneath the parking lot there. We were very successful … but we did our first free-standing building in Bend. It kind of changed what McGrath’s was from that point on.”

Bend proved McGrath’s seafood sold as well in the High Desert as it did in the Willamette Valley, and the company went on to add 18 locations throughout Oregon, and in Washington, Idaho, Arizona, Colorado and Utah.

While McGrath said in an interview last week that he might have been better off staying in Bend golfing and fly-fishing, he grew a successful business that provided opportunity to many individuals. The company employs more than 1,000 people, some of whom have been with McGrath’s 30 years, he said.

At one time, the company employed 1,450 people, a number that, through attrition, is down to about 1,025 today, according to bankruptcy records.

“We haven’t even laid off one person,” McGrath said. “We don’t even have any unemployment claims.”

McGrath can’t say yet if the company will be able to keep all 20 locations.

The company has asked the Bankruptcy Court to OK hiring Restaurant Management Group, in part, to help decide which restaurants to keep open and negotiate with lenders and landlords to restructure obligations of restaurants that can’t service their debt, records show.

Bend seems safe. The building has no debt, only a lease with the mall for the land, and the location is profitable, McGrath said. While the restaurant industry has become more competitive here and business has been hurt by the area’s high unemployment and foreclosures, “business is still pretty good now” and will improve when the economy does, he said.

Where the company has been hit hard is with new restaurants it opened in places like the Phoenix area, one of the hardest-hit real estate markets in the nation. The company opened three places there from 2003 to 2006, and they performed well, McGrath said. But other restaurants also jumped into the red-hot Sunbelt market; competition increased, then real estate collapsed and the recession hit, and people cut meals out, all of which make it hard to service debt, especially before you’ve developed the kind of loyal following you have in your home state.

It becomes too much, McGrath said.

“You have to do a lot of business just to break even” in restaurants, he said. Once you break even, you do well if you can keep it busy, but as business slows, ‘break even’ becomes difficult, he added.

“I have a lot of regrets,” he said of some of the company’s expansion. “It breaks my heart. I didn’t know that those businesses wouldn’t be more successful outside the Oregon markets.”

But this Oregon company isn’t giving up, no matter how painful bankruptcy is.

“It’s very, very emotional, worse than I thought it would be,” he said. “This being a family business, it’s been real hard on our family.”

But the company loves selling seafood and filed Chapter 11 to remain operating, reorganize and emerge stronger.

“We want to keep our business going for generations,” McGrath said.

For customers, employees and others, we hope it does.