Max & Erma's File Bankruptcy, Franchisees Object

Max & Erma’s franchise owners are in open rebellion against the decision by their new franchisor, after 16 months at the franchising firm’s helm, to file for bankruptcy. They want the franchisor's bumbling CEO out and the court to appoint a chief reorganization officer to lead the franchise network through Chapter 11.

'We have no confidence in the current management,' said Charles Lagarce, president of the Columbus-based chain's franchise-advisory board. 'We've just seen a tremendous amount of loss of intellectual value into the company, and we're doing our best to protect our investment.

'We believe in our brand. It's just a question of (the company) being under very poor management in the past year. We're trying to protect our assets, our employees and our customers. That's what we care about.' – Columbus Dispatch

Max & Erma’s was bought in 2008 by G&R Acquisitions, led by Gary Reinert Sr., who took the company private. Nation's Restaurant News reports that Reinert had planned to save the company by negotiating some $25 million in deals to sell company-owned restaurants to franchisees. But the financial credit crunch dried up the financing for the franchise candidates.

The 28 franchisees in a sea of 79 company-owned restaurants have a very high barrier to convince the court that these independent small businesses have a say in where their franchisor goes or that their franchisor’s management is guilty of fraud or total incompetence. After all, businesses go out of business all the time due to just being in the wrong place at the wrong time, like the current soft economy, irrespective of the composition of management.