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Enndigans: Bennigan's Files Chapter 7
Submitted by Dan Maizner on Tue, 2008/07/29 - 11:33.
NEWS FLASH: Just saw this flash across CNBC at the office:
Bennigan's Files Chapter 7 - 800+ units - Some franchisees vow to continue operations. Includes Steak and Ale brand as well.
Any Bennigan's folks out there? Anyone know a franchisee? Is there an IndFA?
Why Franchisees Need to Contribute to Blue MauMau
Great story lead, Dan. Thanks for being a citizen reporter and letting the community know so quickly of the Bennigan's and Steak & Ale announcement of liquidation.
Frankly, Bennigan's was off our radar and I'm sorry that we weren't a better resource to its franchise owners.
Part of the value of Blue MauMau is getting information from inside the system - news from the front lines before big news like this happens. So while the corporate spin is that everything is just peachy-keen, you'll be plugged in here. In that way, your franchisee leaders do not need to be so surprised when it is announced that the chain is going to be liquidated. The field staff that keeps you informed when they visit do not need to be surprised. And most importantly, you do not have to be surprised.
We are a citizen trade journal, one of the first of its kind, in which the news depends on your contributions.
If you think your system is in a lot of trouble and you post those concerns, the news process will begin to unfold.
We have reporters. If they smell something, they will begin to seek confirmation and to dig further. Community experts will chime in and provide guides and resources. As will our members who may have gone through this before.
Blue MauMau is in need of your feedback from a franchise owner's perspective into your franchise system. Albeit that this news was reported here quickly thanks to Dan's watchful eye, this piece on Bennigan's and Steak & Ale makes me painfully aware that we have blind spots right now. Please post with us so that all of us may have better vision.
Metromedia Troubles
There have been questions in the industry press for the last couple of months about Metromedia's (parent company of Bennigan's, Steak and Ale, Ponderosa, and Bonanza)ability to continue operations. All 70 of the Steak and Ale locations were corporately owned and they have all closed. With the approximate 250 Bennigan's split between franchisees and corporate a significant part of this chain went dark yesterday with no advance warning. So far Bonanza and Ponderosa corporate are still in existence.
With Chapter 7 proceedings Bennigan's franchisees may have a new corporate structure to deal with before long. They should be thinking about what Ground Round franchisees did with buying the franchise rights
Re: Metromedia Troubles
Benigan's Franchising Co. LP and Steak and Ale Franchising, Co. LP are not part of the bankruptcy so they will continue business as usual.
The Truth Shall Set You Free!
TIF
Bennigans filing DOES affect zees
TiF writes:
The "truth" is that the franchisees will not continue business as usual. Many foodservice consumers are acutely sensitive to any negative information and history has demonstrated that a bankruptcy can indeed lead to a decline in sales at operating units.
Additionally, the decline in purchasing power and the decline in marketing support, plus the decreased "top of mind" awareness caused by the decline in number of restaurants...all of this should be cause for concern.
There is nothing the f'zees can do about the bankruptcy filing; that is a fact which they can not change. To pretend that this is "business as usual" ignores the reality, which is that f'zees are in for some rough times ahead.
Prospective franchise purchasers should look at the financial stability of the franchisor and related entities.
This is a lesson broader than Bennigans: take a look at Coldstone Creamery, for example--teetering on the brink, and booking large amounts of revenue from journaling "gift card" sales (which should be a liability) to income. There are a number of zors out there who have one foot in Chapter 7 and another on the banana peel.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Re: Bennigans filing DOES affect zees
Well Paul you are right it is now business as unusual. I was referring to those folks who may think that franchisees could now do as they please with disregard to their obligations under the franchise ageement.
The Truth Shall Set You Free!
TIF
Ignorant lawyers
TiF: in fairness, I would point out that it is not unheard of for people to get this erroneous idea from their lawyer. A few years back, the ABA Forum on Franchising gave a presentation on Royalty Strikes, and both the zor-side and zee-side attorneys on the panel said that they personally had run across attorneys who told franchisees that since the franchisor was (allegedly) not meeting the obligations under the Franchise Agreement, that the franchisee could get out of the FA. Some attorneys even said that the client could continue doing business and simply "withhold" the royalty payments.
Paul Steinberg
Franchisee Attorney, New York City, Ph: 212-529-5400
Re: Ignorant lawyers
Not surprising! I have experienced franchisees that have dug themselves an even deeper holes on poor advice from lawyers.
The classic is the "royalty strike" and the lawyer holding the held back royalty in an escrow account.
The Truth Shall Set You Free!
TIF
Press Release From Bennigan's Steak and Ale L.P.
Bennigan's Franchising Company, L.P. and Steak & Ale Franchising Company, L.P. Clarify Status of Franchise-Owned Restaurants and Bennigan's and Steakhouse Brand Assets
Tuesday July 29, 5:24 pm ET
138 Domestic and International Restaurants Open for Business and Not Part of Chapter 7 Filing By Parent Company, S&A Restaurant Corp.
PLANO, Texas, July 29 /PRNewswire/ -- Bennigan's Franchising Company, L.P. and Steak & Ale Franchising Company, L.P., the owners of the Bennigan's and Steak & Ale trademarks and franchise agreements, were not part of the Chapter 7 filing made by its parent company, S&A Restaurant Corp., today. The 138 domestic and international franchisee-owned restaurants remain open and fully operational. Bennigan's Franchising Company, L.P. and Steak & Ale Franchising Company, L.P. will continue to provide high quality support services to its franchisees and remain focused on maintaining and maximizing the value of the franchise brands for its franchisees and their loyal customers.
SOURCE Bennigan's Franchising Company, L.P.; Steak & Ale Franchising Company, L.P.
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Link to WSJ Article
http://online.wsj.com/article/SB121734771456393641.html?mod=hpp_us_whats_news