One brand consistently at the top of the fast casual burger segment has suffered a big blow. Magic Brands LLC, parent company of Fuddruckers, filed for bankruptcy protection April 21. Two days later, Magic Brands received court approval for its bankruptcy filing, enabling it to move forward with plans to sell approximately 62 of its restaurants.
The company has agreed to a $40 million deal with Tavistock Group for the acquisition of approximately 62 Fuddruckers locations and its Koo Koo Roo concept. Tavistock is the same private-equity firm that purchased FREEBIRDS World Burrito in 2007.
According to an article in the Wall Street Journal, none of the 135 franchised locations are named as part of the filing. Additionally, plans are underway to close nearly 25 corporate-owned locations by April 30. The locations being closed have either lease issues or low foot traffic, said company spokeswoman Anita-Marie Laurie.
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The bankruptcy petition was approved by the District of Delaware in Wilmington, and listed assets of $1 million to $10 million and debts of $10 million to $50 million. The approval will allow Fuddruckers to pay pre-petition employee wages, salaries and benefits during its voluntary restructuring under Chapter 11. The company also received permission to honor its various customer programs, including use of gift cards.
Wells Fargo Capital Finance Inc., the company's senior lender, has committed to provide $14 million in financing to enable continued operations.
"Approval of our first-day motions sets the Company on a very strong footing. This relief ensures that normal operations will continue at all Fuddruckers restaurants," he said.
"Our restaurants are open and running as usual. Vendors will be paid for all goods furnished and services provided after the April 21, 2010, filing date. Employee wages and benefit programs will continue as before."
In 2006, Fuddruckers generated an estimated $373 million in sales. Revenue in fiscal 2008 was reported at $152 million, which declined to $144 million in FY 2009. Same-store sales were down 10 percent at the end of 2009, according to court papers. The bankruptcy petition also puts the number of collectors at between 1 and 49.
More information also can be found at www.fuddruckersrestructures.com.
