Shilo Inn closure throws Idaho Falls restaurant, employees and events into limbo
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IDAHO FALLS – David Rail was surprised by the news Tuesday morning that the building that houses his business was closing.
Rail owns Trofi, a Mediterranean restaurant inside the Shilo Inn at 780 Lindsay Boulevard in Idaho Falls.
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In a conversation with EastIdahoNews.com, Rail says he got a call from hotel manager Kirk Hansen on Tuesday morning informing him that two people from the U.S. Bankruptcy Court were there to shut down the hotel.
The hotel filed for Chapter 11 bankruptcy in 2020. Its registered agent, according to the Idaho Secretary of State’s website, is Cogency Global Inc. The parent company is Shilo Management Corporation.
Hansen declined to comment on the situation, but a court order dated April 24 shows that the case is now being converted to Chapter 7 bankruptcy, and that the estate and all its assets are being liquidated.
Although Rail and his wife were aware of the previous Chapter 11 filing, he says the current order came without warning and took them by surprise.
When he arrived at work that morning, Rail says the hotel staff were terminated and kicked out of the hotel. The building and all the businesses inside were immediately shut down.
Rail says it puts him and his wife in an uncomfortable position.
“We can’t operate the restaurant or the Flying Goose lounge next door because the only way to access those is through the hotel lobby,” Rail says.
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They’re working with the court to reopen the restaurant. If the court doesn’t rule in their favor, they’ll be forced to relocate or close the business.
While the restaurant’s future remains in limbo, Rail says he and his wife are forced to let their employees go. They were in the process of sending termination notices to their staff on Thursday morning.
The Rails have catering contracts for different community events over the next month. Rail says he’s planning to honor those commitments, but without kitchen/event space or employees, he’s in a difficult spot.
“These clients have paid deposits and have been promoting their event, selling booth spaces and sending out invitations. They can’t just go find another location on such short notice,” Rail explains. “If we can show (the court) that the building is secure and we can keep the hotel isolated, I’m hopeful they will let us use the space for those events.”
The Shilo Inn in Idaho Falls is one of numerous locations closing nationwide. A 2023 industry report says the chain’s founder, Mark Hemstreet, owed more than $20 million in back taxes. Its parent company has a history of financial woes dating back to the early 2000s.
The company first filed for Chapter 11 bankruptcy in 2002 due to significant debt resulting from the post 9/11 tourism slump. Travel was shut down for an extended period at the time, which negatively impacted the hotel industry.
“More than half of Hemstreet’s hotels filed for bankruptcy in the aftermath — each was a separate limited liability company. Court records suggest Shilo’s fortunes never really recovered,” according to Willamette Week.
In 2016, a California bank won a $20 million judgment against Hemstreet for defaulted loans. Four years later, the Idaho Falls location filed for Chapter 11 bankruptcy.
Chapter 11, according to the U.S. Bankruptcy Court, allows a corporation to reorganize with the goal of becoming financially productive again. Chapter 7 bankruptcy is a result of failure to repair the situation and the company is usually liquidated and sold in these cases.
Court documents dated April 24 show that Shilo Inn in Idaho Falls was required to “file a proposed plan and disclosure statement no later than March 31, 2026.” The debtor failed to appear at a status conference in April and still had not filed a plan, as of April 22, according to court records.
As a result, “the case of Shilo Inn, Idaho Falls, LLC, case number 20-42489-MJH, is hereby converted to cases under Chapter 7 of the Bankruptcy Code,” court records say.
Kathryn Ellis was appointed trustee of the Idaho Falls property. The order requires the debtor to “immediately turn over … all records and property of the estate under the Debtor’s custody and control” to Ellis.
A schedule of all unpaid debts must be filed within 14 days. The property owner has 30 days to send a final report and account to Ellis.
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Rail opened Trofi inside the hotel in January, but he operated a gourmet burger restaurant at the same location for five years before that. It opened in 2020 around the same time the hotel filed for Chapter 11 bankruptcy.
After all that’s happened, Rail says he’s trying to stay positive, but “it’s an odd place to be in.”
“I’ve never been (in a situation) like this where we’ve got a court order that says ‘close down,'” he says. “It’s frustrating, stressful and anxiety-inducing because we don’t know what’s going to happen.”
