Six Smashburger units in the San Diego area, along with a 10-unit development agreement, are scheduled for auction on May 22 in the bankruptcy of franchisee SoCal Eats LLC.
The franchise operator filed for Chapter 11 bankruptcy protection on Jan. 8 in U.S. Bankruptcy Court for the Southern District of California.
Officials with the Denver-based corporate office of Smashburger have described the bankruptcy as the result of capital structure issues within the franchise operation.
Court filings indicate that Paraiso Culinary Ventures LLC was named as a stalking horse bidder for the six restaurants and related assets for a proposed $2.6 million, including the forgiveness of debt owed to Paraiso for prior management fees.
Paraiso is a Smashburger franchisee that last year bought five restaurants in northern San Diego County from SoCal Eats and affiliates. Paraiso also had an agreement with SoCal Eats to operate the six restaurants currently for sale under a management contract.
Alan Gallup, asset recovery specialist with National Franchise Sales, which is handling the auction, said the six restaurants are open and profitable.
David Whisenhunt is listed in court documents as SoCal Eats’ managing member. He could not be reached for comment.
SoCal Eats owns the restaurants under six wholly owned subsidiaries, including SoCal Eats College LLC; SoCal Eats Kearny Mesa LLC; SoCal Eats La Jolla LLC; SoCal Eats Market Street LLC; SoCal Eats Mission Valley LLC and SoCal Eats Point Loma LLC. The company was once called Smash Bros, but later was changed to SoCal Eats LLC.
The primary creditor is Vibra Bank, which has a claim of about $1.2 million, according to court documents. There are unsecured claims of about $3.6 million.
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