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Second 100-plus-unit Waffle House franchisee files for bankruptcy

TAMPA Fla. A 146-unit Waffle House franchisee filed for Chapter 11 bankruptcy protection on Wednesday, less than a month after a 113-store operator in the system also sought protection from creditors.


Brandon, Fla.-based Northlake Foods Inc., with Waffle House coffee shops in Florida, Georgia and Virginia, is said to be the Norcross, Ga.-based chain’s largest franchisee. Its filing in U.S. Bankruptcy court here followed the August Chapter 11 filing of Nashville, Tenn.-based SouthEast Waffles LLC, whose franchisees are located in four other southeastern states.



Pat Warner, a spokesman for Waffle House Inc., said the franchise agreements with Northlake and SouthEast had been terminated because both companies were behind on payments.



Northlake’s filing asserts the company was forced to seek protection from creditors because of economic issues and an attempt by franchisor Waffle House Inc. to rescind the operator’s franchise rights. Court documents cite a shortage in cash flow, and say the concern had entered into an agreement with Waffle House Inc. in April to pay $45,000 per month for accounting services from the franchisor.



“The financial and organizational problems related to Northlake Foods are internal issues for that company and its ownership group, and in no way involve Waffle House Inc.,” the franchisor said in a statement issued to Nation’s Restaurant News.  “Waffle House Inc. continues to be a strong, vibrant company with a system of 1,550 restaurants in 25 states.”



The company is listed as Northlake’s largest unsecured creditor, with more than $550,000 in arrears. The franchisee’s largest secured creditor, according to the filing, is Bank of America, to which it owes approximately $9.7 million.



Northlake also cited sales declines and a rise in its labor costs from a minimum-wage increase. It also noted that September is the slowest month for its 90 units in Florida.



The company listed approximate 2007 revenues of $88 million. 



Northlake did not respond to requests for more information.



The other franchisee, SouthEast, asserted in its Chapter 11 filing that the company was forced to seek bankruptcy protection because of “accounting irregularities,” and cited an “abrupt resignation” of an employee. The employee was not identified in the filing.



“We are working with creditors to reach a mutually satisfactory resolution to allow the debtors to move forward with good prospects for a reorganization,” said Glenn Rose, an attorney for SouthEast.


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