Restaurant chain Karen’s Diner collapses owing $4.3 million, Hobart restaurant owed $6k

Other restaurant owners have been left fuming as their own businesses take a hit off the back of the news.

A Tasmanian small business owner has been left fuming over the collapse of restaurant chain Karen’s Diner which has left her $6000 out of pocket.

News.com.au previously reported that on May 30, Viral Ventures (Australia) Pty Ltd went into voluntary liquidation, which was the company behind several Karen’s Diner pop-up stores around the country.

The restaurant was centred around the gimmick of the staff pretending to act rudely towards customers as ‘Karens’ and first came to Australia in 2021.

A liquidator’s report obtained by news.com.au and filed with the corporate regulator shows that the company had racked up $4.3 million worth of debt by the time of its demise, including from intercompany loans, and has 56 creditors who have lodged claims for money they are owed.

Megan Ma, 32, runs the popular Tasty Korea Chicken in Hobart alongside her husband and is one of the unsecured creditors caught up in the company’s collapse.

Representatives from Karen’s Diner approached her several months ago about running a ‘Karen’s on Tour’ Diner on tour event, where she would provide the venue and food for a ticketed event.

She went ahead and ran the event, providing seating and food to 400 patrons over two days, in the belief she would be paid afterwards. But instead, just days later, Karen’s Diner went bust, leaving her $6000 in the hole.

“This is a very big loss for us in this time,” Ms Ma told news.com.au.

The advertisement for Karen’s Diner on Tour at Ms Ma’s restaurant.

One of the two nights Ms Ma hosted that she was never compensated for.

Ms Ma said Karen’s Diner did a ‘tour’ in Hobart where they approached a number of business owners, including her.

They would sell tickets to the event and use their own waiters while she would provide the venue and the food, and also other back of house roles and cleaning duties.

She would then invoice them for her own costs.

“They didn’t pay anything upfront. They paid after the event,” Ms Ma explained.

Everything went smoothly the first time this went ahead, so she agreed to host a second event but this time something was different.

“Usually they contacted us before the event, but this time they didn’t,” she recalled.

“One of the staff contacted us one day before which is not really well organised.”

On May 26 and 27, around 400 customers came to eat her famous Korean fried chicken, where Karen’s Diner employees greeted them with insults and jibes.

Two days later, Ms Ma sent them an invoice of $6104 for her services. But the very next day, the company had appointed liquidators.

Making her more angry is the fact Karen’s Diner was in discussions with liquidators well before the event.

A liquidator’s report revealed that the firm had a meeting with liquidators four days earlier but still allowed the event at Tasty Korea Chicken’s restaurant to go ahead.

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Ms Ma’s restaurant specialises in Korean food, particularly fried chicken, and said she is endeavouring to keep her prices low despite the $6000 loss and rising costs.

According to the report, Chris Johnson and Andrew McCabe of insolvency firm Wexted Advisors held a meeting with the company over Microsoft Teams on May 22.

During the meeting, they “outlined the options available for the directors, including voluntary administration and creditors voluntary liquidation”.

There were several more meetings and they also met the accountant and were provided with financial documents pertaining to the operations of Karen’s Diner.

Finally, on May 30, Mr Johnson and Mr McCabe were appointed as joint liquidators.

The restaurant chain has assets estimated to be worth just $100,000, making Ms Ma fearful she will never recover her missing money.

She only took over the Tasty Korea Chicken joint in 2021 and every dollar counts at the moment amid the cost of living crisis.

The new business owner still had to pay her six staff members from the work and otherwise has had to wear the cost.

“The electricity has increased, the ingredient costs (have increased) as well, everything,” she said.

“We are trying to keep our selling price not increase much compared to the percentage of goods increasing.”

Karen’s Diner, an American style diner famous for its rude staff who deliberately sprout expletives at customers, has shut down its pop-up stores and tours in Australia.

Karen’s Diner at Surfers Paradise with a sign warning it has closed down.

The parent company of Viral Ventures Australia, Viral Venture Global, previously told news.com.au all Sydney stores of Karen’s Diner remained open as they were operated under a separate business.

Karen’s Diner first launched in Australia through its Sydney city store in October 2021 and since then several more stores opened — another in Sydney, and one in Adelaide and Brisbane.

They also launched three pop-up Karen’s Diner restaurants in Melbourne, the Gold Coast and Perth as well as opening up ‘Karen’s Diner on Tour’.

All those pop-up stores have since shut down due to the liquidation.

News.com.au contacted Viral Ventures for further comment.

Karen’s Diner is no stranger to controversy.

The restaurant chain was forced to apologise in the past after staff took their rudeness act a little too far.

In July, an employee at the Brisbane store made sexually inappropriate comments to a 14-year-old girl and her father, saying the girl was on Only Fans and her dad was a paedophile.

The store was also called out for body shaming a bald man in Brisbane, slamming the joke as “cruel”.

And in November, the ABC reported staff were considering formal action over claims of sexual and physical harassment.

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