Bennigan's, the Trail of Who Owns What

Submitted by Don Sniegowski on Fri, 2008/08/01 - 18:13.

What company now controls Bennigan’s trademarks and franchise agreements and what Metromedia companies are being liquidated? Pursuit of these questions over the last few days by Blue MauMau (BMM) has resulted in answers: but they have been confusing. In tracking business stories, it is important to know which business actually has what. Otherwise in the news frenzy, franchisees and the press can be fooled by slight of hand.

Nation's Restaurant News broke the news on the new owners a few hours before Blue MauMau. This journal was busy chasing the same information from a different source and sidetracked for a time into thinking the buyer was another private equity firm that is known for its predilection for distressed franchise chains. NRN writes:

"Atalaya Capital Management LP . . . and CRG Partners . . . have taken over the management of the Bennigan's Grill & Bar franchise system in the wake of the Chapter 7 bankruptcy filings for court-supervised liquidation this week by S&A Restaurant Corp. and some affiliates, a franchisee here [Baton Rouge] said."

Judging from that excerpt, has the Bennigan's and Steak & Ale holding company, S & A Restaurant Corp, filed Chapter 7 to liquidate? Or is it just liquidating some subsidiaries?

CRP Group, a turnaround specialist that is now working closely with the franchisees and Atalaya, says that Atalaya Capital Management were senior lenders to S & A Restaurant Corp. When Bennigan's- and Steak & Ale-related companies were forced to file Chapter 7, Atalaya elected to vote their stock and to install a new board and management team in the remaining companies. They didn't like the direction in which the company was heading—liquidation.

That means S&A Restaurant Corp is intact and has changed management.

But attorneys Kane Russell Coleman & Logan specifically name S & A Restaurant Corp. on a list of debtors.

When called on Friday, public relations consultant Leah Templeton, a company spokesperson, could not answer questions about the closings. She no longer represented S & A Restaurant Corp. However, on Tuesday she did. At that time she told the Wall Street Journal:

"Future decisions regarding the affairs of the debtor companies will be determined and administered by a bankruptcy trustee"

A court document (pdf) says that "Bennigan's and Steak and Ale," the brand names and not the company names, "have filed liquidation cases under Chapter 7 of the Bankruptcy Code." To confuse matters more, "S & A Restaurant Corp." appears in the list of debtors to be administered by the trustee.

Robert Cohen, an owner of a Bennigan's in Lenox, Massachusetts says, "The franchise entities are still alive and kicking, and a new company has moved in to grow the [franchise] brand."

" . . . he [Cohen] received a communication from Atalaya Administrative LLC, which is establishing a temporary umbrella organization for the franchise restaurants. 'The tone of the e-mail is positive,' said Cohen." —Berkshire Eagle

Meanwhile, turnaround specialist CRG Partners thinks it and Atalaya have the right to use the trademarks. It is working with the trustees for access to records and on other matters.

Has the ownership of the intellectual property rights for Bennigan's and Steak & Ale not changed hands? Are the franchisees in a position to do anything?

Confused?

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"Don't worry, be happy" email

Submitted by Paul Steinberg on Sun, 2008/08/03 - 20:41.

"'The tone of the e-mail is positive,' said Cohen."

""The franchise entities are still alive and kicking, and a new company has moved in to grow the [franchise] brand."

Robert Cohen is right. Obviously if things were really bad, the public relations people would be sending an e-mail with a negative tone. LoL

Oh, and prospective purchasers are already lining up to attend discovery day; although there are 4,000 systems to choose from, how often do you get to tell your spouse: "Honey, this franchisor really knows its stuff. And we don't have to worry about the franchisor going bankrupt 'cause they already are bankrupt." 

I remember a judge in EDNY when the attorney for the filing debtor said that his client would "work with" the Trustee in a Chapter 7. The judge told the attorney that if he or his client even gave a phone call to the Trustee she would hold them both in contempt.

Suggestion to zees: have your IndFA hire a bankruptcy specialist, and listen to counsel...not e-mails written by the PR people. 

Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400

S&A Restaurant Corp Trademarks Transfered to Metromedia

Submitted by Don Sniegowski on Mon, 2008/08/04 - 16:13.

The U.S. Patent & Trademark Office's TESS program shows that S & A Restaurant Corp is the legal entity that owns the brand trademarks for Bennigan's. The U.S. Bankruptcy Court for the Eastern District of Texas shows S&A Restaurant Corp as one of 45 debtors (pdf), which should mean that the intellectual property cannot belong to anyone until after the court's auction.

However, one IP attorney shares this:

S&A Restaurant Corp made an assignment to FORTRESS CREDIT OPPORTUNITIES LP of a security interest in the marks.  What that generally should mean, if properly drawn, is that S&A retained ownership and Fortress secured the loan based on the asset value of the trademarks. in 2003

Then, on July 10, 2008, S&A assigned its trademark rights to Metro Media.  There appears to have been no recorded reassignment of the security interest back to Fortress so Fortress may still be a creditor.

So, are the franchise owners in much of a driver’s seat? Since S&A Restaurant Corp is in liquidation, will private equity firm Atalaya need to take control of Metromedia in order to have a right to lead Bennigan's franchisees?

Attorneys, please weigh in.

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