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PLANO, Tex. (Blue MauMau) – At midnight on Monday, the parent company of Bennigan’s and Steak & Ale restaurant chains filed Chapter 7 bankruptcy to liquidate its various companies. The filing marks one of the largest Chapter 7 bankruptcies of a restaurant chain in recent history, according to Technomic.
When the franchisor disappears, so does the franchise advisory council that was set up for franchise owners to advise the franchisor on paths forward.
What's left is a mess.
Although numerous phone calls were placed to the holding company, Metromedia Restaurant Group, this publication received no reply. Metromedia, owned by billionaire John Kluge, had no hotline set up for the press. No one on Wednesday answered the phone. On Thursday the person who finally answered didn’t know where to refer press inquiries or how to get in touch with Bennigan’s Franchising Company, L.P., the company that was supposed to take charge of franchise support.
The result was that despite determined efforts, there was no corporate information. Metromedia apparently received so many inquiries it wasn’t prepared to answer, that on Thursday afternoon it changed its web site to direct readers to the court handling the case, with the other main message being that their other brands were still open for business.
As this is written Metromedia's website is down, seemingly because staff is processing new content that is about to go up.
Left in the smoke of a decimated scene was Bennigan’s Franchise Operator Association, an independent association of franchise owners. Caught off guard, Larry Briski, president of the association, became the de facto point man. His company, Shamrock Management Group, a Bennigan’s franchise, has been receiving what seemed to him to be hundreds of calls inquiring about the bankruptcy. With the phones ringing off the hook, his assistants sounded tired. Briski wanted to waste absolutely no time in getting right to the point of BMM’s phone call.
He said, “I’ve been on the phone with reporters for the last three days with Associated Press and stuff, so I don’t have a lot of time. I’m still trying to run a business.”
Briski was not alone. Many Bennigan’s franchise owners across the country were running a business while getting calls from local and national media.
Phone lines directing callers to recorded messages were popping up by Thursday and Friday.
Metromedia Restaurant Group had been looking for a buyer for their troubled divisions for months. When Metromedia closed down its subsidiary S & A Restaurant Corp., within hours Bennigan’s Franchising Company, L.P. and Steak & Ale Franchising Company, L.P. announced that they were still around to support the franchisees.
What of Bennigan’s and Steak & Ale's Franchisees?
A spokesperson for a Bennigan’s franchise in Orlando stated that CRG Partners out of Dallas, Texas was looking into the purchase of the company.
CRG Partners are turnaround specialists who help save distressed firms. A spokesperson said that when lender Atalaya Capital Management learned of the liquidation of S & A Corporation companies, it decided to exercise its vote and change the board of directors and management of the holding company.
When asked which of the various Metromedia companies has the trademarks, Briski answered, “An Atlanta company has the trademarks.” He was referring to the new buyer of the brand, Atalaya Capital Management, a private equity firm, to which he had been introduced during a conference call.
Briski stated that Bennigan's franchisees were not involved in the purchase of the brand. “That was strictly between [Atalaya] and the Metromedia Restaurant Group. They are putting the franchisee group back together. Our owners will meet with them in the next two weeks. Hopefully, we will have a great relationship as the brand moves forward.”
When asked point blank if the franchisees had given any thought to purchasing the brand, Briski responded, "That has not been discussed yet."
Franchisees Can Lead the Troubled Brand
Jim Coen, executive director of the New England Franchise Association and a board member of Dunkin Donuts Independent Franchise Owners, says, “Franchisees have power [in such circumstances]. They can get in the way of any deal.”
Bob Purvin, the chair of an organization of some 50,000 franchisees, the American Association of Franchisees and Dealers, adds how precarious this point in time is for Bennigan’s franchise owners. “When a franchisor files for bankruptcy, the franchisees are in a very vulnerable place, but not in a hopeless place,” he observes. “If they do nothing, they are at the second lowest rung on the pecking order for the distribution of assets. They can have their supply chain go away. Their ownership goes away and there is an immediate devaluation of their brand.”
“On the other hand,” he adds, “if they mobilize their common resources in an association and bring about common counsel, they probably have the wherewithal to acquire the brand and improve their ownership rights vis-à-vis whatever their franchise agreement might have been.”
Coen acknowledges that there is a flip side. Franchisees aren’t always the best people to operate a franchise system. “Sometimes franchisees cannot see the big picture and can only see their location on main street.” He notes that bankrupt companies which have been bought out by franchise owners like Ground Round in years past haven’t been giving a particularly stellar performance. He is quick to add, “Whether franchise owners want to run their chain or not is one thing. But they certainly have a say in who runs it.”
Immediate Supply Problem
Briski has a more pressing problem than figuring out leadership and long-term strategy. "Our biggest concern is immediate: the supply chain," he says. "Our present supply chain will last between 30 to 60 days.” He adds, “We will work diligently with the new owners to make sure that there's a supply chain. The second thing is to let our guests know that our restaurants are still here.”
Bennigan's still has field operations managers that come and visit. But when asked what happened to the field operations support that their franchisor had provided and that had been promised by Metromedia in a press release on Tuesday, Briski stated, "The Atlanta company [Atalaya Capital Mangement] pretty much controls Bennigan's Franchising LP."
CRG Partners has just hired some eight ex-employees to help support the franchise operators. Private equity firm Atalaya sent out an email to franchise owners to inform them that they were taking leadership of the chain.