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News Briefs
Bennigan's Tries to Salvage Franchises While Firm Heads into Bankruptcy
Metromedia Restaurant Group surprised the franchise industry by filing for Chapter 7 bankruptcy on July 29 on behalf of one of its restaurant franchise subsidiaries, S&A Restaurants Corp. (“SARC”). Within two weeks, SARC, the former franchisor of Bennigan's, was moved out of the picture in favor of S&S GP Holdings (“SAGP”), which is now operating the franchise system. SAGP's officers were appointed by Atalaya Capital Management LP, which was the largest holder of SARC secured debt when the bankruptcy occurred. The new entity, Bennigan's Franchising Company L.P. (“BFC”), now supports the 81 U.S. and 52 non-U.S. franchise units, according to Alex Stockham, a vice president for Rubenstein Associates, who is responding to media inquiries for BFC.
“The bankruptcy of the company-owned stores and SARC affiliates providing support services to the system created challenges for BFC and its franchisees,” said Stockham. “BFC has been working hard since the SARC bankruptcy to reconstitute management and support services for the Bennigan's franchise system.”
Meanwhile, company-owned Bennigan's restaurants have closed and are being liquidated in Chapter 7 proceedings being overseen by the U.S. Bankruptcy Court, Eastern District of Texas. The court is also overseeing liquidation of Steak & Ale restaurants, which were owned by SARC. No Steak & Ales were franchised, but SARC owns the trademark and can sell franchises if it chooses to do so, said Stockham.
One unresolved issue now being addressed in court is the trademarks. SARC owns the trademarks, and according to reports on TheDeal.com and BlueMauMau.com, the marks were pledged as collateral for a loan in 2003 to Fortress Credit Opportunities LP. Atalaya bought the loan debt from Fortress in 2008 and thus has a first priority security interest in the marks. Stockham confirmed that Atalaya is now negotiating with the trustee in bankruptcy court for outright ownership of the marks.
The potential complication is that Metromedia placed a lien on the trademarks in early August, prior to filing for bankruptcy.
FTC's Newest FAQs Explain Disclosure Timing, Item 12
On Aug. 1, the FTC released two new FAQs related to the new Franchise Rule. The 25 FAQs released to date can be found at http://www.ftc.gov/bcp/franchise/amended-rule-faqs.shtml.
In the first new FAQ (No. 24), the FTC staff wrote that it would not recommend an enforcement action if a franchisor provides a prospect with the Franchise Disclosure Document (“FDD”) while the franchisor is updating its FDD, if the franchisor: 1) advised the prospective franchisee that it was revising its FDD to reflect a material change; and 2) delivered the revised FDD as soon as permitted by the applicable state law, but in any event at least 14 calendar days before the prospective franchisee signed a binding agreement with, or made a payment to the franchisor or an affiliate in connection with the proposed franchise sale. However, the FTC noted that some states would prohibit a franchisor from “offering or selling franchises while it is in the process of updating its disclosures to reflect a material change.”
In FAQ No. 25, the FTC explained where in Item 12 in the FDD a franchisor must disclose that a franchisee is not being granted an “exclusive territory” in the franchise contract. The FTC makes a distinction between a franchisor establishing a company-owned or franchised outlet selling the same or similar goods or services under the same or similar trademarks or service marks, in contrast to a franchisor reserving the right to sell through alternative distribution channels or to sell competitive brands. If the first type of exclusivity is not being granted, the franchisor must make the disclosure about exclusive territory; if the second type is not granted, the franchisor does not have to disclose. However, another part of the Franchise Rule regarding Item 12 disclosures would still require the franchisor to disclose elsewhere in Item 12 that it is reserving the right to sell through alternative channels and/or competitive brands.
Bennigan's Tries to Salvage Franchises While Firm Heads into Bankruptcy
Metromedia Restaurant Group surprised the franchise industry by filing for Chapter 7 bankruptcy on July 29 on behalf of one of its restaurant franchise subsidiaries, S&A Restaurants Corp. (“SARC”). Within two weeks, SARC, the former franchisor of Bennigan's, was moved out of the picture in favor of S&S GP Holdings (“SAGP”), which is now operating the franchise system. SAGP's officers were appointed by Atalaya Capital Management LP, which was the largest holder of SARC secured debt when the bankruptcy occurred. The new entity, Bennigan's Franchising Company L.P. (“BFC”), now supports the 81 U.S. and 52 non-U.S. franchise units, according to Alex Stockham, a vice president for Rubenstein Associates, who is responding to media inquiries for BFC.
“The bankruptcy of the company-owned stores and SARC affiliates providing support services to the system created challenges for BFC and its franchisees,” said Stockham. “BFC has been working hard since the SARC bankruptcy to reconstitute management and support services for the Bennigan's franchise system.”
Meanwhile, company-owned Bennigan's restaurants have closed and are being liquidated in Chapter 7 proceedings being overseen by the U.S. Bankruptcy Court, Eastern District of Texas. The court is also overseeing liquidation of Steak & Ale restaurants, which were owned by SARC. No Steak & Ales were franchised, but SARC owns the trademark and can sell franchises if it chooses to do so, said Stockham.
One unresolved issue now being addressed in court is the trademarks. SARC owns the trademarks, and according to reports on TheDeal.com and BlueMauMau.com, the marks were pledged as collateral for a loan in 2003 to Fortress Credit Opportunities LP. Atalaya bought the loan debt from Fortress in 2008 and thus has a first priority security interest in the marks. Stockham confirmed that Atalaya is now negotiating with the trustee in bankruptcy court for outright ownership of the marks.
The potential complication is that Metromedia placed a lien on the trademarks in early August, prior to filing for bankruptcy.
FTC's Newest FAQs Explain Disclosure Timing, Item 12
On Aug. 1, the FTC released two new FAQs related to the new Franchise Rule. The 25 FAQs released to date can be found at http://www.ftc.gov/bcp/franchise/amended-rule-faqs.shtml.
In the first new FAQ (No. 24), the FTC staff wrote that it would not recommend an enforcement action if a franchisor provides a prospect with the Franchise Disclosure Document (“FDD”) while the franchisor is updating its FDD, if the franchisor: 1) advised the prospective franchisee that it was revising its FDD to reflect a material change; and 2) delivered the revised FDD as soon as permitted by the applicable state law, but in any event at least 14 calendar days before the prospective franchisee signed a binding agreement with, or made a payment to the franchisor or an affiliate in connection with the proposed franchise sale. However, the FTC noted that some states would prohibit a franchisor from “offering or selling franchises while it is in the process of updating its disclosures to reflect a material change.”
In FAQ No. 25, the FTC explained where in Item 12 in the FDD a franchisor must disclose that a franchisee is not being granted an “exclusive territory” in the franchise contract. The FTC makes a distinction between a franchisor establishing a company-owned or franchised outlet selling the same or similar goods or services under the same or similar trademarks or service marks, in contrast to a franchisor reserving the right to sell through alternative distribution channels or to sell competitive brands. If the first type of exclusivity is not being granted, the franchisor must make the disclosure about exclusive territory; if the second type is not granted, the franchisor does not have to disclose. However, another part of the Franchise Rule regarding Item 12 disclosures would still require the franchisor to disclose elsewhere in Item 12 that it is reserving the right to sell through alternative channels and/or competitive brands.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
Legal Possession: What Does It Mean?
Possession of real property is a matter of physical fact. Having the right or legal entitlement to possession is not "possession," possession is "the fact of having or holding property in one's power." That power means having physical dominion and control over the property.
The Stranger to the Deed Rule
In 1987, a unanimous Court of Appeals reaffirmed the vitality of the "stranger to the deed" rule, which holds that if a grantor executes a deed to a grantee purporting to create an easement in a third party, the easement is invalid. Daniello v. Wagner, decided by the Second Department on November 29th, makes it clear that not all grantors (or their lawyers) have received the Court of Appeals' message, suggesting that the rule needs re-examination.