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toolsBankruptcy Filings, Franchisors
Bankruptcy: Bankruptcy is a legal process for firms unable to pay their debts. The filing begins with all of the debtors assets weighed to see what creditors can be paid. In the United States bankruptcies are filed under Chapter 7 that liquidates assets, Chapter 11 that reorganizes a company and Chapter 13 that lowers debt covenants.
Current Bankruptcy Filings of Financially Weak Franchisors
- Bennigan's and Steak & Ale - Parent company Metromedia decides to liquidate its troubled Bennigan's and Steak & Ale brands. Those are held by S & A Restaurant Corp. Franchisees, a private equity firm and a turnaround firm are trying to make lemonade from the Chapter 7 liquidation lemon.
- Buffets Inc - filed for bankruptcy in January 2008
- Help-U-Sell - Franchisor of some 450 offices, which is down from two years before when the firm had an estimated 800+. The firm filed Chapter 11 at the end of August of 2008 when a regional franchisee that liquidated sued the company for $1 million.
- Roadhouse Grill Inc - In May of 2008 the court converted the Chapter 11 to a Chapter 7 liquidation.
- Village Inn & Baker's Square - Owners of this chain, Vicorp Restaurants Inc. and VI Acquisition Corp. filed Chapter 11 on April 3 due to higher food and labor costs.
History: Famous Bankruptcies
| 7-Eleven | Parent Southland Corporation filed Chapter 11 in Oct 1990. 7-Eleven's Japanese master franchise bought a majority stake in the company. 3,600 U.S. stores. Many times more in Japan. |
| Bakers Square and Village Inn | Filed bankruptcy in April '08. Attempting restructure of 343 restaurants. 93 are franchises. |
| Bennigans / Steak & Ale | Abruptly closed corporate locations on July 29, but 138 franchises remain |
| Boston Market | Filed Chapter 11 in Feb '04. 72 franchisees took over chain. |
| Day's Inn | |
| Denny's | Chapter 11 in Jul 1997. Lost $54 million for settlement of racism class action lawsuit. Of 1,500 restaurants, some 1,000 are franchised. |
| Fantastic Sam’s | Fantastic Sam's parent company, Opal Concepts, Inc. of Southern California filed bankruptcy. It was then sold to Cheveux Acquisition. There are over 1,900 franchises. |
| Ground Round | Filed Chapter 11 in Feb '04. 72 franchisees took over chain. |
| International House of Pancakes | In 1975, International Industries folded. Chief financial officer, Richard K. Herzer, began working with creditors to keep IHOP alive. IHOP was acquired in '79 by a Swiss company, Wienerwald Holding but by '81 Wienerwald declared bankruptcy. |
| Krystal | Southern burger chain filed Chapter 11, Dec '95 after losing $13 million in labor lawsuit. |
| Old Country Buffet, Country Buffet, Ryan's, Hometown Buffet, Fire Mountain | Jan 22, 2008 Buffet Holdings, Inc. files Chapter 11. Chains have over 500 restaurants in 39 states, with only a few being franchised. |
| Original Roadhouse Grill | Filed Chapter 11 in Oct '07 then Chapter 7 liquidation in May '08. Company stores closed. A few franchises still open. |
| Popeyes and Church's Chicken | When hungry Popeyes' bought Church's Chicken in '89, it sunk both companies. Church's was sold. It has 1,600 locations and Popeye's 300. |
| Sizzler | Chapter 11, Jun '96. Gone from 215 company-owned restaurants to 36 in '08. 183 franchises. Equity firm in '08 selling chain. |
BusinessWeek has a slide show on 12 famous franchise brands that filed bankruptcy, When Franchisors Stumble.
To our readers: Please look at our list of franchisors that have filed for bankruptcy. The community needs your help. If you see any firm that is left out, please add their name in your comment. It must have a link to a credible site that reports their bankruptcy proceedings. Otherwise, it is hearsay and speculation.
Work-in-Process
The following companies have not been confirmed as going through bankruptcy. They may just have been distressed franchise systems at one time. We need sources to show that these firms definitely went through a bankruptcy filing procedure. Again, the following companies are hearsay only until they are inserted in the above list with a hyperlinked source.
- Hardee’s
- Burger Chef
- Minni Pearl’s
- Romacorp (Tony Roma’s) 2006
- Mother’s Restaurant
- Pizza Express
- Pizza Hut of America, Inc.
- Pizza Factory
- TCBY
- Orange Julius of America
History: Distressed Companies
- Carvel Corporation (distressed with angry franchisees in the 60s, 70s and 80s but do not see bankruptcy filings)
