GREER S.C. Kainos Partners Holding Co. LLC, operator of 56 Dunkin’ Donuts locations in New York, South Carolina and Nevada, filed for Chapter 11 bankruptcy protection this week, citing the economic downturn and shrunken consumer spending.
The Greer-based company, which was formed in 2005 and also operates a central manufacturing location to produce doughnuts and baked goods for all Dunkin’ Donuts franchisees in the Buffalo, N.Y., market, has an additional eight stores under construction. It is one of the largest Dunkin’ Donuts franchisees and employs about 700 people.
“The customers upon whom [Kainos] rely have been under extreme financial pressure due to the economic downturn and rising food and other costs,” the company said in its bankruptcy filing with the U.S. Bankruptcy Court for the District of Delaware. “The central manufacturing location also has been a major cash drain on Kainos from its inception ... These issues significantly hampered [Kainos’] ability to service its non-trade related debt and precipitated the [company’s] current liquidity crisis.”
The franchisee listed between $10 million and $50 million in both assets and liabilities, including $24.9 million owed through a series of lending arrangements with The CIT Group and $4.2 million owed to franchisor Dunkin Brands Inc.
CIT, Dunkin' Brands and Kainos reached an agreement for pre-arranged debtor-in-possession financing prior to the bankruptcy process, as well as a plan for emerging in the coming months, said Jim Balis, president of turnaround firm The Restaurant Management Group and chief restructuring officer for Kainos.
“It is rare to have such harmony among a lender, franchisor and business operator, which is why we are very optimistic that the Chapter 11 proceeding will be brief, and provide the necessary relief for a healthy future,” Balis said in an e-mail statement to Nation’s Restaurant News.
Areorganization plan is expected to be filed with the bankruptcy court by July 21.
Prior to its filing, Kainos projected that to service its debt, the franchisee’s Dunkin’ Donuts operations would have needed to book revenues totaling $15,000 per week. Average weekly store sales dropped to $9,500 per week by the spring of 2009, making the bankruptcy filing necessary, according to court documents.
In addition, Kainos learned that its chief financial officer, who was not named in court documents, had used corporate funds for personal expenses totaling $420,000. The executive was fired in February.
Dunkin’ Donuts, which has about 8,000 locations worldwide, is a subsidiary of Canton, Mass.-based Dunkin’ Brands Inc., which is owned by private-equity firms Bain Capital, The Carlyle Group and Thomas H. Lee Partners.
Dunkin’ Donuts, which has about 8,000 locations worldwide, is a subsidiary of Canton, Mass.-based Dunkin’ Brands Inc., which is owned by private-equity firms Bain Capital, The Carlyle Group and Thomas H. Lee Partners.
Contact Sarah E. Lockyer at [email protected].