Bids made for bankrupt franchisee's Jack in the Box stores

SAN DIEGO Three bidders have made a collective stalking horse offer of more than $27 million for 61 Jack in the Box restaurants in California involved in the bankruptcy of Kobra Associates Inc. and affiliated companies.

The live auction for the units is scheduled for next week in the ongoing bankruptcy proceedings for Roseville, Calif.-based Kobra Associates, which filed for Chapter 11 reorganization last year. The company, a franchisee of about 70 Northern California locations, was controlled by Abe Alizadeh, whose real estate development firm Kobra Properties also filed for Chapter 11 in late 2008.

The bidders include Jack in the Box Inc.’s largest franchisee Anil Yadav, who is hoping to acquire 38 units around the Sacramento area.

Existing franchisee Ben Nematzadeh is bidding for 21 units around the Fresno area, and new franchisee Romesh Japra has bid for two units near the Northern California border in Eureka and Crescent City.

Alan Gallup, a spokesman for National Franchise Sales, a brokerage firm handling the court-ordered auction, said another five units also on the block were left out of the bid because of poor unit economics largely attributable to “ridiculously high occupancy costs.”

Those units will be included in the live auction scheduled for Feb. 23 and 24 in Sacramento, where other bidders will be considered for the 66 units available.

The auction next week does not include the stores' real estate, most of which is owned by franchisor Jack in the Box Inc.

Brian Luscomb, a spokesman for the San Diego-based franchisor, said he wouldn’t speculate on whether the company might attempt to acquire some of the restaurant operations in the upcoming auction.

Observers noted, however, that such a move might run contrary to the company’s ongoing refranchising efforts.

Luscomb noted that the court is allowing the company to participate in the auction process by evaluating prospective bidders on their abilities as restaurant operators, their financial qualifications and whether they might fit with the brand’s culture.

Once the “highest and best” offer is selected, the final sale is subject to court approval, Gallup said.

In January, a separate auction was held for 24 properties owned by Kobra Properties, including the land for five Jack in the Box locations, all of which were sold.

Three of those properties were bought by Jack in the Box Inc., though not the operating businesses, said Mark Thomann, who represented Development Specialists Inc. of Chicago in that bankruptcy auction.

Contact Lisa Jennings at [email protected] [3].