Jerrold Bregman Weighs In on How Fat Brands’ Bankruptcy Could Impact Franchisees
Jerrold Bregman is back in Restaurant Dive with a continued analysis of the Fat Brands bankruptcy, this time examining what the Chapter 11 process could mean for the company’s over 900 franchisee commitments.
In the article “How Fat Brands’ bankruptcy could impact franchisees,” Jerry explains that while Fat Brands has so far maintained business as usual for operators, franchisees may soon experience significant disruptions. “Oftentimes, as the franchisor is sliding towards bankruptcy, running out of cash, it’s unable to support its franchisees and its commitments, including the supply of goods, marketing support, advertising and other related kinds of support,” he shares with Restaurant Dive.
Remarking that they are generally rare in practice, Jerry also addresses the possibility of franchisee agreement cancellations, sharing that “It’s unlikely [Fat Brands] will do it here, because franchises represent a revenue stream for the owner of the brand.”
However, Fat Brands does seem to be moving towards a potential brand sale. Jerry predicts what franchisees can expect from that process, emphasizing that buyers will need to be able to demonstrate “adequate assurance of future performance” and establish they have the financial wherewithal to fulfill franchisor obligations in the future.