Special Situations, Bankruptcy

Description of Client Company: A restaurant franchisee in bankruptcy.

Situation as described by Company management:
  • The Company experienced financial decline due to the recession. Creditors included lenders, landlords and franchisor. Company need creditability with creditors to present plan for restructuring. 
Engaged for:
  • Business assessment for lenders and management
Situational Appraisal:
  • The Company’s financial statements did not provide the information necessary to evaluate the results of each store. The financials reflected management adjustments used to achieve certain internal reporting objectives that were not indicative of economic results.
  • The Franchisee had large debts to the franchisor. The current franchisor acquired the business recently.
  • Restated financials for each operating store segregating discretionary allocations and expense classifications utilized for management purposes, which were not indicative of economic results.
  • Recommended store closings and other alternatives
  • Recommended approach for negotiating with creditors, particularly the franchisor recognizing that the franchisor did not pay for the debts incurred by the franchisee.
  • Presented report to owners and creditors

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