Fuddruckers' Parent Company Files Bankruptcy

Magic Brands LLC, the parent of Fuddruckers and Koo Koo restaurants has filed Chapter 11 bankruptcy and announced it will close 24 corporate owned locations by April 30th including one of its Dallas-Fort Worth area stores located in Garland. None of the 135 franchised Fuddruckers has been included in the Chapter 11 bankruptcy.

Magic Brands filed Chapter 11 bankruptcy with assets of $1 million to $10 million and debts of $10 million to $50 million.  In a prepackaged bankruptcy plan, the Tavistock Group, a Florida-based investor, agreed to buy nearly all of assets of Magic Brand for $40 million. Wells Fargo Capital Finance has also agreed to provide $14 million in debtor-in-possession financing during the company’s Chapter 11 bankruptcy. The Tavistock purchase must be approved by the bankruptcy court; but Magic says it expects that the sale will close within 90 days after their bankruptcy filing.

“By shedding burdensome leases under the protection of Chapter 11 [bankruptcy], Fuddruckers will regain the financial stability and flexibility it needs to pursue strategic growth initiatives that will benefit our brand, our franchisees and, most importantly, our guests,” chief executive Peter Large said in a statement.

Magic Brands’ Chapter 11 bankruptcy comes at a time when the retail industry is being hit with huge losses and the credit markets are still struggling.  The bankruptcy financing provided by Wells Fargo may give Magic Brands the financial stability they need to shed debts, survive the recession and increase their revenue.  Shedding corporate locations has been a strategy implemented by several other restaurants during Chapter 11 bankruptcy.  This strategy will allow them to reduce costs significantly while still pulling in revenue from their franchises.

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