Fuddruckers Franchisees Oppose Sale to Tavistock

(Reuters) – Franchisees of bankrupt Fuddruckers restaurant chain objected to the sale of the company to Tavistock Group, saying they have received no assurance regarding Tavistock’s ability to carry out its obligations as a franchisor.

Magic Brands LLC, the parent of the Fuddruckers and Koo Koo Roo restaurant chains, filed for bankruptcy protection in April and agreed to sell most of its assets to Tavistock for $40 million.

In court papers filed on Thursday, FIFA Inc, an organization of franchisees of Fuddruckers, said Magic Brands had not provided any information regarding Tavistock’s infrastructure and ability to support and service an entire franchise system.

Tavistock is a private investment firm founded by Joe Lewis, a British billionaire who is estimated to have lost several hundred million dollars in early 2008 investing in Bear Stearns Cos.

The franchisees under FIFA claim to own over two-thirds of the restaurants in the entire Fuddruckers franchise system.

FIFA also objected to the break-up fees of $1.4 million payable to Tavistock if the deal falls apart, saying it does not meet standards set by the U.S. bankruptcy code.

FIFA said a potential bidder in a position to offer the company slightly more than Tavistock’s proposed purchase price of $40 million might well find himself “over his head” at the prospect of having to pay an additional $1.4 million even to enter the bidding.

Magic Brands had said 135 Fuddruckers restaurants operated by franchisees, which are not part of the bankruptcy filing, would remain open.

Fuddruckers specializes in hamburgers, and Koo Koo Roo in chicken.

Many casual dining chains have struggled as consumers burdened in a weakened economy choose cheaper dining options, including dining at home.

The case is In re: Magic Brands LLC, U.S. Bankruptcy Court, District of Delaware, No. 10-11310. (Reporting by Santosh Nadgir in Bangalore; Editing by Unnikrishnan Nair)