PLANO TEXAS Bennigan’s and Steak and Ale brands, franchisees of Bennigan’s Grill & Tavern had met with executives to discuss the state of the company. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
In what the franchisees said they thought was a candid review of the company’s performance, the franchisor never mentioned the possibility of filing for Chapter 7 bankruptcy liquidation. On July 29, Plano-based MRG closed about 60 company-operated Steak and Ale restaurants and about 140 company-operated Bennigan’s, leaving franchisees of nearly 140 franchised Bennigan’s units to figure out what came next after learning of the closures in the media. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
This, observers say, is a classic example of how not to handle franchisee relations. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Franchisors err when they don’t treat franchisees like partners, said Todd Hansen, a principal with Hansen and O’Malley, a Chicago-based business communications firm. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
“For a mature brand, it behooves them even more because you have a network of veteran franchisees with experience that can be leveraged and consulted with to strengthen the brand,” he said. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Both Steak and Ale, which Norman Brinker founded in the 1960s, and Bennigan’s were early entrants in the casual-dining segment. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Bennigan’s franchisees admitted that they knew that the company was not firing on all cylinders. There had been unflattering news stories about MRG and executive turnover and layoffs at headquarters. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
“We knew they were having difficulties,” said franchisee Rick Pastorek, head of BOL Inc. in Baton Rouge, La., which operates seven Bennigan’s. “We thought we had reasonably good rapport with them in that meeting and finally we were having a face-to-face to deal with a number of issues. But they didn’t mention a Chapter 7 possibility at all. It was a surprise and a shock.” —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
“It was a real mess,” said Rob Carringer, managing partner of CRG Partners Group LLC, a crisis management consulting firm that is helping Bennigan’s Franchising Co. LP, the pre-existing franchising arm of the chain as it rebuilds itself under the ownership of Atalaya Capital Management, a New York-based private-equity group. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Carringer said his company moved quickly to reach out to both the domestic and international franchise community in a series of phone conferences to offer reassurance and optimism. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
He said the next order of business was to rehire more than a dozen support staffers who had been fired from such departments as information technology, purchasing and construction and, most importantly, to restore the franchisees’ 800 phone line for immediate crises, like point-of-sales systems crashes. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Vendors and distributors, who assumed they would not get paid as the news of the liquidation spread, also were assured that the franchisees’ businesses were sound. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Next, landlords of the shuttered units were contacted to see what it would take for franchisees to take over the sites, Carringer said, adding that he was stunned to discover that 90 of the approximately 140 shuttered Bennigan’s units were cash-flow-positive by healthy margins. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
“I think a landlord would rather have a franchisee take over those sites if for no other reason than that there’d be little to no retrofitting,” he said. “There’d be continuity.” —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
While most franchisors acknowledge that good communications with franchisees are crucial, especially when contemplating tough decisions like bankruptcy, there is no legal requirement that such disclosures be made to licensees, said Susan Grueneberg, a franchise and contract attorney in Santa Monica, Calif. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
Stressing that she is not involved with Bennigan’s and believes that franchisors should be open with their franchisees, Grueneberg noted that only in the presale phase are franchisors obligated to proffer unpleasant details about the business through the uniform franchise offering circular. —About 90 days before Metromedia Restaurant Group filed liquidation petitions for S&A Restaurant Corp. and affiliates, shuttering 200 restaurants operating under the
