Financing

Wendy’s and NPC International are at an impasse on negotiations

The burger franchise is going to mediation in a dispute with its largest franchisee over a proposed bankruptcy sale to Flynn Restaurant Group.
Photograph: Shutterstock

With negotiations stalled, Wendy’s and NPC International are heading to mediation to resolve differences over a proposed sale of the bankrupt franchisee’s restaurants to Flynn Restaurant Group.

According to court filings in NPC’s Chapter 11 bankruptcy case this week, Wendy’s, NPC and FRG have “reached an impasse as to certain specific issues” in the proposed sale of the operator.

NPC is the largest Wendy’s and Pizza Hut franchisee, operating nearly 400 restaurants of the burger chain to go along with 900 units of the pizza concept. It is also the second largest franchisee in the U.S.—one spot behind FRG, which operates Arby’s, Applebee’s, Panera Bread and Taco Bell.

FRG was approved as the “stalking horse” bidder for all of NPC with an $816 million bid, an offer that would ultimately create a massive company that generates close to $4 billion in sales every year through a half-dozen concepts that span the country.

The bid was set to provide a starting point for a trio of auctions, one apiece for the different brands’ restaurants and a third for the whole company. Those auctions were canceled, seemingly paving the way for FRG to buy NPC.

While Pizza Hut has OK’d FRG’s ownership of the company, Wendy’s has not. The company opposed FRG’s purchase of its restaurants, arguing that there are differences in FRG’s proposed capital spending for new stores and remodels.

But Wendy’s also wants FRG to sell its Arby’s and Panera Bread restaurants. Wendy’s sees the brands as competitors. The Dublin, Ohio-based company has submitted its own bid as part of a group of approved franchisees.

FRG has argued in court that the differences between it and Wendy’s are “solvable,” saying that it has agreed to spend millions to upgrade the restaurants and build new ones. It also points out that Wendy’s was until recently a major investor in Arby’s parent company Inspire Brands (and at one point owned the chain) while there are companies that operate both Wendy’s and Arby’s and/or Panera.

The dispute has kept the fate of NPC and the brands in limbo—not to mention the brands for which the company is the largest operator.

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