Meatheads has reached an agreement with LQD Financial Corp. after the lender objected to last week’s bankruptcy filing by Meatheads’ parent company, Crave Brands.
LQD, which is listed in the bankruptcy filing as being owed $6.65 million by Crave Brands, had alleged that the filings were “a stunt Crave’s former manager pulled to stay in charge,” among other alleged improprieties that LQD claimed should invalidate the case.
Chicago-based Meatheads, which operates the 13-unit fast-casual Meatheads Burgers & Fries concept, said in a statement provided to Nation’s Restaurant News on Friday that it has since held “several discussions” with LQD and that it expects to propose a plan of reorganization in the next 30 days.
The Meatheads and Crave Brands bankruptcy petitions were both signed by Steve Karfaridis, manager, who LQD had alleged did not have the authority to file the bankruptcy because he had been replaced as manager before the filing. LQD said it had replaced Karfaridis with Robert Handler, who LQD had contended remains the current manager and did not authorize the bankruptcy filing.
The two sides have since agreed that Karfaridis will continue as manager of Meatheads and that Handler will not be involved in operations, according to a filing with the U.S. Bankruptcy Court in The Northern District of Illinois.
LQD had also alleged that Karfaridis has mismanaged the company, and that LQD had a plan in place to sell Meatheads’ assets to another company if the bankruptcy case was dismissed. LQD’s motion to dismiss alleged that Karfaridis and his partner, Michael Webb, borrowed $6.55 million in 2019 from LQD to acquire Crave Brands and Meatheads, and subsequently misused corporate funds for personal expenses.
In a statement provided to Nation’s Restaurant News, Meatheads said it was current on all vendor payments when it filed Chapter 11, and that its 2020 Paycheck Protection Program loan has been forgiven. It received a second-draw PPP loan earlier this month.
“As a result of this loan and cash flow from Meatheads’ operations, Meathead has plenty of liquidity to satisfy all of its operating expenses and exit Chapter 11,” the company said in the statement.
In a joint filing with the U.S. Bankruptcy Court in The Northern District of Illinois, Meatheads and LQD said LQD had been granted replacement liens and security interests on Meatheads’ property and assets, and that Matthew Brash had been named as trustee in the case. Meatheads also agreed to provide daily reporting to LQD and Brash on its financial condition and bank accounts.
A hearing on Meatheads’ use of cash collateral has been scheduled for April 27.
Meatheads listed total assets of about $6.7 million and total liabilities of $8.4 million in its filing. Its operating report showed that the restaurants themselves were profitable, with year-to-date restaurant profits of $482,786, on revenues of $2.76 million, for period from Dec. 28, 2020 through March 21 of this year. Adding in corporate expenses, however, Meatheads posted a loss of $61,043 in that period.
Most of the debts owed by Meatheads consist of rent, trade debt and sales tax totaling less than $1 million. It also lists a PPP loan of about $2.42 million. Crave also lists an Economic Injury Disaster Loan of $149,900 from the Small Business Administration.
The Meatheads Burgers & Fries chain was founded in 2007 in Bloomington, Ill., by Tom Jednorowicz, a former executive at Potbelly Sandwich Works and Einstein Bros. Bagels, and partner Doug Reichl, founder of Tartan Realty Group. It was cited as a Breakout Brand by Nation’s Restaurant News in 2013, given its growth plans at the time, and its presence in the fast-growing “better burger” segment.
By 2015, it had grown to 16 locations, including in an outpost in Indiana, and was reportedly eyeing expansion into Wisconsin as well. Its website currently lists 12 restaurants in Illinois, including one franchised location, and one location in Munster, Ind.