Downsizing Good in the Neighborhood Improves Sale Values

Restaurants, Hospitality & LeisureTurnarounds & Restructuring

Apple Gold Group, Raleigh NC

Challenge

110 Restaurant Applebee’s Franchisee, $185 million sales, $75 million debt

  • Company generating $3 million EBITDA and unable to service $75 million of debt
  • 20 restaurants in loss position
  • Applebee’s brand in multi-year decline
  • Over $10 million delinquency on Royalty and Advertising payments to Franchisor
  • Franchisor demanding Franchisor directed sale that would result in $20 million loss to bank group and triggering various personal guarantees by Owner
  • Owner giving lip service to taking decisive action

Solution

  • MorrisAnderson engaged as CRO over Franchisor objection
  • Cash projections developed which demonstrated company had ability to pay partial royalty fees
  • Company closed approximately 20 restaurants with Franchisor approval for $4 million improvement in EBITDA
  • Negotiated early lease termination payments with approximately 10 landlords
  • Structured sale process started with restaurant industry investment banker
  • Started sale of company-owned restaurant properties

Results

  • Company was sold in two out-of-court sale transactions
  • Banks will get 100% loan recovery
  • Owner avoided any significant losses due to potential personal guarantee enforcements
  • Company avoided bankruptcy
  • Approximately 2,000 jobs preserved
  • All trade creditors and employees paid in full

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