Bankrupt franchise group sells stores to Burger King: 34 local sites now under Miami company’s control; Omni partners still operating other restaurants

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A Chapter 11 bankruptcy case involving more than three dozen Burger King restaurants has resulted in one of the area’s largest Burger King franchisees’ selling 34 of its units to Miami-based Burger King Corp.

Locally based Omni Restaurants Inc. and sister companies KD Development Inc. and Michael P. Frank Co. Inc. filed for Chapter 11 bankruptcy protection from creditors in September 2004.

Omni shuttered 12 of the 46 restaurants involved in the petition in an effort to regain solid financial footing, but the company continued to lose money, court filings show. Principals of Omni operate another 63 BKs that were not involved in the bankruptcy case. All the company’s restaurants are in central Indiana.

Burger King paid $1.03 million for 34 of Omni’s restaurants in a March 22 bankruptcy-court sale, court documents show. The company also assumed some of Omni’s liabilities, including $4.6 million owed to Fifth Third Bank of Indiana and nearly $400,000 owed to Farmers’ Bank of Frankfort.

The sale brings a relatively peaceful resolution to the bankruptcy case from the perspective of most of Omni’s creditors, including several landlords of Burger King stores, said Henry Efroymson, an attorney with Ice Miller who represented two landlords.

“Burger King made it very easy and seamless” on landlords, Efroymson said. “The bankruptcy proceeding provided everyone involved with a very streamlined method for transferring the leases.”

The bankruptcy case hasn’t officially been dismissed yet, but all the major issues have been substantially resolved, he said.

Omni officials Richard Deignan and Fred Kaufman did not return calls seeking comment on the sale.

Burger King is continuing to operate the 34 restaurants and has no plans to sell them to other franchisees, said Allison Russell, director of corporate communications for the company.

Following the sale, Burger King owns about one-third of the Indianaplis area’s Burger King stores.

The franchisee bankruptcy and subsequent acquisition by Burger King is a scenario that has played out repeatedly across the country in recent years. Hampered by competition from other fast-food chains and high-level reorganizations at Burger King Corp., many of the company’s largest franchise groups have declared bankruptcy. Many of those cases ended with another franchisee or the company acquiring the stores, sometimes hundreds at a time.

Last fall, the company’s second-largest franchisee, California-based Sydran Group, sold its 226 BK restaurants for $20 million to an acquisition group affiliated with Cerberus California Inc. after declaring bankruptcy.

All of Burger King’s company-owned restaurants are east of the Mississippi River, Russell said.

Burger King, recovering from several years of lackluster growth amid hot competition, has been acquiring more restaurants from franchisees to have more control over the company’s growth and menu, analysts said.

The vast majority of Burger Kings are still franchisee-owned, however. Of the company’s nearly 8,000 restaurants in the United States, less than 10 percent are owned by the company.

The chain has reported 13 consecutive months of improving same-store sales. Last year, the company was purchased by a Texas-based investment group, which brought in turnaround expert Greg Brenneman as its CEO, marking the 10th chief executive in the last 15 years for the company.

Burger King has also set itself apart with new menu offerings, such as the Enormous Omelette and the Tendercrisp Bacon Cheddar Ranch, and bizarre TV commercials from Miami-based ad firm Crispin Porter + Bogusky featuring the likes of an unusual smiling king or Hootie and the Blowfish front man Darius Rucker.

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