Case Studies
J.S. Held Acquires Element Forensic Engineering, Expanding Insurance-Focused Capabilities for Mid-Market and Large Loss Property Claims Across Canada
Read MoreA long-standing Hardee’s franchisee operating 145 restaurants faced significant operational and financial challenges. Approximately 50 locations were losing money, while the Hardee’s brand was experiencing negative same-store sales performance. Adding further pressure, the franchisor was requiring remodel investments across most of the portfolio, creating substantial capital expenditure demands. The owners had decided to exit the franchise operation.
Complicating matters, the franchisor opposed the closure of underperforming restaurants, limiting management's ability to address persistent losses and improve profitability. At the same time, the secured lender faced the prospect of virtually no recovery on its $22 million debt position. While the owners also operated a separate and legally distinct 100-restaurant Hardee’s franchise business that remained profitable, the challenged portfolio required a restructuring strategy to preserve value and support an orderly sale process.
Our team was engaged to help develop and execute a strategy to improve operating performance and optimize value prior to a sale. Our experts entered negotiations with the franchisor regarding both restaurant closures and the potential disposition of the franchise business.
To support the restructuring effort, the team engaged a real estate consultant to pursue rent reductions where appropriate and an investment banker to market the business to prospective buyers. Through difficult negotiations with the franchisor, which we, as outside consultants, led, approval was ultimately obtained to close more than 40 underperforming restaurants. These closures improved EBITDA by approximately $4 million and helped strengthen the overall business prior to the sale.
The real estate consultant secured rent savings through negotiations, while the investment banker identified and secured a stalking horse bidder. The company subsequently filed for Chapter 11 with the goal of selling the business and completed a sale transaction. As a result, the secured lender recovered more than 70% of its debt exposure, representing an improvement of approximately $16 million over the baseline recovery expectation. The owners were also able to continue operating their separate profitable Hardee’s franchise business.
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