ROSEVILLE Calif. Jack in the Box franchisee Kobra Associates Inc. said it has reopened its 70 Northern California restaurants after filing for Chapter 11 bankruptcy protection from creditors, including the state tax collector.
The Roseville, Calif.-based company on Friday reopened the 70 restaurants closed at midnight Wednesday as a result of what the Jack in the Box franchisee described as tax “issues” and the need for “negotiations” with the California State Board of Equalization. The Board of Equalization, earlier this month, said Kobra Associates owed it $1.5 million in sales or use taxes, but an Associated Press report last week said the amount of back taxes has grown to $4.2 million and that the Board of Equalization had forced the closures by temporarily revoking the restaurants’ resale permits.
Board of Equalization officials could not be reached for comment by press time.
Kobra Associates is controlled by Abe Alizadeh, whose Roseville-based real estate development firm, Kobra Properties, filed for Chapter 11 bankruptcy protection last December. Alizadeh also controls Food Service Management Inc. of Roseville, which Board of Equalization officials have said owes the state at least $547,000 in sales and use tax.
On Friday, Carslon Restaurants Worldwide, parent of the T.G.I. Friday’s casual-dining chain, ordered Alizadeh to stop operating 10 West Coast restaurants under the Friday’s brand.
Kobra Associates’ bankruptcy filing on Friday in U.S. Bankruptcy Court in Sacramento “came in the wake of negotiations with creditors having reached an impasse, leaving the franchise no alternative but to seek Chapter 11 protection,” the company said in a statement. The firm added that “talks are already under way with possible lenders.”
“Our focus in the days ahead will be to return to normal business operations and to work cooperatively with our creditors to complete this process as quickly as possible,” Alizadeh said in the statement. “We apologize to our customers and our employees for the disruption in service, deeply appreciate their patience and are eager to resume fulfilling our commitment to them.”
Franchisor Jack in the Box Inc. of San Diego is “in regular contact with [Alizadeh] and [is] hopeful that his restaurants will resume normal operations,” chain spokesman Brian Luscomb said. Referring to the earlier bankruptcy of the franchisees’ real estate development company because of problems with financiers, Luscomb said of Alizadeh, “His Jack in the Box restaurant operations are profitable, but other business ventures of his have suffered in this difficult economic environment.”
In all, Jack in the Box Inc. operates or franchises 2,199 namesake quick-service restaurants.
Kobra Associates, apart from its alleged tax woes and the financial challenges faced by bankrupt affiliate Kobra Properties, was sued last November for allegedly failing to pay hourly night shift employees for all work performed, including overtime wages. They also allegedly denied workers legally required rest and meal breaks. The lawsuit seeking class action status was filed in Sacramento County Superior Court and lists as the plaintiff former Kobra Associates employee Patricia Morgan.
Contact Alan J. Liddle at [email protected].