A Dunkin' and KFC operator has bid for 42 Meritage restaurants in four states, about $443,000 a store, as the bankrupt franchisee shrinks toward roughly 200 units.
About $443,000. That is what a Wendy’s restaurant out of Meritage Hospitality Group’s bankruptcy is worth to the first buyer willing to put a number in a court filing.
Meritage filed Oct. 21 to sell 42 restaurants in Tennessee, Arkansas, Mississippi and Missouri to Divine Infinity Operations for $18.6 million, according to Restaurant Dive and Nation’s Restaurant News. The buyer group is led by Hiren Patel, whose Divine Investors runs Dunkin’ and KFC locations. The sale needs court approval and could close by late November.
This is the third chapter in a fight we have followed since September. Wendy’s terminated Meritage’s franchise agreements on Sept. 16 over more than $27 million in unpaid royalties, and the operator filed Chapter 11 the next day. Since then the two sides have fought over which stores close.
Meritage began shopping these restaurants last November through Auspex Capital. In a court filing, Auspex managing director Christopher Kelleher said the bank looked for multi-unit operators with the “franchisor relationships necessary to obtain franchisor approval and to finance and close a transaction of this size.”
“A prompt sale to the Buyer will preserve the going-concern value of the Restaurants, preserve hundreds of jobs and the Restaurants’ franchise relationship, and provide liquidity for the Debtors’ estates,” Kelleher wrote.
That phrase about the franchise relationship carries weight. Proceeds could help pay past-due royalties, Restaurant Dive reported, which might cool a dispute Wendy’s has pressed in court for five weeks. Meritage told the court the bid was the “highest or otherwise best offer” for its Tennessee business.
The rest of the portfolio keeps shrinking. Meritage asked the court last week to reject leases on 13 more units and could close up to 60 stores. Together with the sale, that could leave it with about 200 Wendy’s restaurants, down from 314 when it filed.
For lenders and buyers watching distressed quick-service portfolios, the per-store price is the fresh comparison point. The filings as reported do not split it among real estate, equipment and operating rights. Meritage is also not alone: franchisees of Carl’s Jr., Hardee’s, Popeyes and Moe’s have filed for bankruptcy this year as traffic and margins slipped, according to Restaurant Dive.
None of the coverage so far includes Wendy’s view of Patel as an operator. For those 42 stores, that may be the approval that counts.
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