Financing

Wendy’s makes a bid for bankrupt NPC International’s restaurants

The burger chain and a consortium of franchisees are bidding for nearly 400 locations. Franchisees will end up with most of the restaurants.
Photo courtesy of Wendy's

Wendy’s said on Thursday that it has submitted a bid for the restaurants operated by bankrupt franchisee NPC International as part of a consortium of operators seeking to take over the nearly 400 locations.

The bulk of those stores would end up in the hands of franchisees, as Wendy’s wants to keep its ownership level at around 5% of the chain’s 5,800 U.S. units. The Dublin, Ohio-based burger chain would keep at most one or two markets, the company said in a filing. Wendy’s had said earlier this month it could put together a bid.

The consortium bid adds to the complexity of the bidding process for NPC, the second largest franchisee in the U.S. and the largest operator of both Wendy’s and Pizza Hut. NPC declared bankruptcy in July and is undertaking a complex, three-part auction, one each for the brands it operates and another for the whole company.

Flynn Restaurant Group, the country’s largest franchise operator, is the “stalking horse” bidder for the whole company with an $816 million bid—any bidder would have to best that bid and pay Flynn a breakup fee of at least $10.5 million.

While Flynn has an agreement with Pizza Hut to operate the 900 units in that chain that NPC owns, Wendy’s opposes Flynn’s operation of its restaurants—citing disagreements over Flynn’s potential capital spending as well as the franchisee’s operation of Arby’s and Panera Bread. Wendy’s says both of those brands are competitors and wants Flynn to sell those concepts.

Flynn Restaurant Group, however, calls differences between it and Wendy’s “solvable” and notes that other operators run both Wendy’s and either Panera Bread or Arby’s.

The auctions for NPC’s restaurants have drawn nearly 60 potential buyers for all or some of the restaurants, which could drive up the ultimate price paid for the 1,300 locations. NPC filed for bankruptcy largely because of its debt load, some $900 million.

Wendy’s typically prefers to control the franchisees that get to buy units within its system. It has been aggressively buying restaurants put up for sale and then selling them to franchisees willing to develop new locations or remodel existing units.

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