Ground Round Franchisees to Acquire Rights

…Judge William Hillman approved the franchisees' $4.85 million bid over protests from U.S. Restaurant Properties, which bid $6.5 million. Hillman said his decision was influenced by the recommendation of the previous owner's lawyers to accept the lower bid because it would avoid potential claims for more than $40 million filed by the franchisees, who together own 69 Ground Round restaurants nationwide.

Associated Press
July 8, 2004

Ground Round Franchisees to Acquire Rights
Associated Press

BOSTON - A judge has awarded a group of Ground Round franchisees the bankrupt restaurant chain's franchise rights, despite objections from a Dallas real estate company which made a higher bid.

U.S. Bankruptcy Judge William Hillman approved the franchisees' $4.85 million bid over protests from U.S. Restaurant Properties, which bid $6.5 million.

Hillman said his decision was influenced by the recommendation of the previous owner's lawyers to accept the lower bid because it would avoid potential claims for more than $40 million filed by the franchisees, who together own 69 Ground Round restaurants nationwide.

"Unless something looks completely off the wall, I have to respect the business judgment of the debtor," Hillman said.

Jack Crawford, who has been named chief executive of the new parent company, the Ground Round Franchise Owners' Cooperative, said he believed the franchisees' direct involvement in the restaurants' operations also was a factor in Hillman's ruling.

"Our bid had the cooperation of the franchisees behind it," Crawford told The Associated Press on Thursday.

A lawyer for U.S. Restaurant Properties said the previous owner, American Hospitality Concepts, entered negotiations with the franchisees after her client submitted the apparent high bid at an April auction.

"The debtor has flip-flopped," Jeanne Darcey said. "U.S. Restaurant Properties was the winning bidder. Now it has turned into the back-up bidder. That was not what U.S. bargained for."

American Hospitality Concepts filed for bankruptcy in February. The 59 Ground Round, Berkshire Grill, Tin Alley Grille and Tap & Grill restaurants owned by AHC closed in February, so abruptly that managers were told to kick out customers and stash food in the freezer. The restaurants, some of which have been sold, remain closed.

The chain's new headquarters will be in Freeport, Maine.

The ruling also clears the way for an unusual arrangement in which a restaurant chain's independent owners also perform the franchisor's typical duties of marketing, promotion and product development.

Crawford owns three Ground Round restaurants in Maine and New Hampshire. The group will emphasize renovations, a new look for the restaurant and menu development as it attempts to revive the brand, Crawford said. Unlike the previous franchisor, the new parent company will not own any restaurants directly.

He said 72 restaurants will be operated under the new ownership.


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