Big Perkins franchisee 5171 Campbells Land Co. (CLC) declared bankruptcy on Monday, just days after its franchisor sued to remove the operator from its 26 remaining restaurants.
Pittsburgh-based CLC, which operates stores in Ohio, Pennsylvania and New York, declared between $10 million and $50 million in estimated liabilities and between $1 million and $10 million in estimated assets, according to the bankruptcy filing.
The Chapter 11 filing was a likely step after Perkins parent company Perkins & Marie Callender’s won a key court decision last week in its effort to remove the operator from those restaurants.
The franchisor sued Campbells last month, citing more than $2 million in unpaid royalties over a nearly two-year period.
The restaurants have a history of financial problems. CLC bought 27 stores out of bankruptcy court in 2018, after having to renegotiate an acquisition agreement with the bankruptcy trustee amid questions about its ability to put up enough cash to fund the deal, according to Perkins’ lawsuit.
But CLC had problems almost immediately, and later that year, the franchisor terminated the franchisee’s agreement over unpaid royalties and the sale of “unapproved products” such as turkey and pork chops.
Perkins granted a temporary license to the operator, working with CLC for more than a year, according to its lawsuit. In May, however, health inspectors in Pennsylvania ordered the closure of one of the franchisee’s restaurants, in Grove City, Pa.
Perkins & Marie Callender’s soon moved to terminate the temporary license, citing the past-due royalties and the franchisee’s continued use of unapproved products and specials. The subsequent lawsuit was to force the operator out of the restaurants.
CLC is no small operator. Its 26 locations represent about 7% of all of Perkins’ 371 total locations and about 10% of its 254 franchisee-owned restaurants.
The filing comes as Perkins & Marie Callender’s itself is pondering a bankruptcy filing as part of an effort to encourage a sale.