From Nation's Restaurant News · · 2m
Wendy's Franchisee Challenges Bankruptcy Closures
Bankrupt Wendy's franchisee fights store closures and termination claims.
In brief
Bankrupt Wendy's franchisee fights store closures and termination claims. Meritage Hospitality Group, a bankrupt Wendy's franchisee, rejects Wendy's proposal to close 10 stores and argues the brand terminated its franchise agreements without proper notice. Originally reported by Nation's Restaurant News.
Bankrupt Wendy's Franchisee Pushes Back
Meritage Hospitality Group, a bankrupt Wendy's franchisee, is fighting the company's termination while the brand seeks more say in which stores close.
Wendy's Objects to 10 Store Closures
Wendy's last week objected to the proposed closure of 10 locations in Oklahoma, Michigan, Georgia, and Florida, offering to replace seven with different stores.
Meritage Closes 41 Restaurants
Meritage is closing 41 of its 314 restaurants in five different groups and was set to have completed 20 closures by Friday.
Negative EBITDA Impact
The restaurants generated $4.2 million in negative EBITDA, or earnings before interest, taxes, depreciation, and amortization.
Wendy's Proposes Store Substitution
Wendy's offered to substitute seven other stores that generated less sales but lost less money, claiming the potential upside for the portfolio outweighs the nominal difference.
Meritage Rejects Proposal
Meritage rejected Wendy's proposal, saying the offer came with just two days' notice and the payment is not secured to cover closure costs.
Franchise Termination Dispute
Wendy's argues Meritage has no right to operate its restaurants because franchise agreements were terminated before the Chapter 11 filing.
Wendy's Claims $147 Million
Wendy's is asserting $147 million worth of claims, including more than $27 million in unpaid royalties and liquidated damages.
Meritage Calls It Non-Termination
Meritage called Wendy's termination a 'non-termination termination' because the notice lacked physical copies and lender notifications.
Store Financial Performance
The stores Meritage closes average $1.15 million in sales and lose $127,000 per store annually, while Wendy's list averages $1.07 million in sales and $114,000 in losses.
Wendy's Financial Argument
Wendy's claims the potential upside for the overall portfolio outweighs the nominal difference in losses between the stores.
Meritage's Stance on Closures
Meritage argues keeping deeper-loss stores open increases debtors' estate losses, contradicting the purpose of the closure program.
The short version
Meritage Hospitality Group, a bankrupt Wendy's franchisee, rejects Wendy's proposal to close 10 stores and argues the brand terminated its franchise agreements without proper notice.
