Bon-Ton Scion’s Fix for Ailing Department Stores: Blow Up the Model

Too much debt and a lack of innovation doomed the company Tim Grumbacher’s grandfather founded

A scion of one of the last American department-store dynasties has a recipe for other ailing chains: stop being a department store.

That realization came too late for Tim Grumbacher to save his own company, Bon-Ton Stores Inc., which is liquidating all of its 262 locations after filing for bankruptcy protection in February.

“If I had had...