A GROUP of O’Brien’s Sandwich Bar franchisees are objecting to a key part of the proposed rescue plan for the chain.
O’Brien’s, which has been in examinership since July, is due to ask the High Court today to transfer leases on a number of its outlets from the company to the franchisees.
AIL Ltd, a company backed by businessmen Graeme Beere and Denis Desmond, wants the leases transferred from the company to its franchisees as a condition of a proposed investment designed to rescue the business. However, solicitor Bill Holohan, who has been acting for a group of franchisees, said yesterday the move was unprecedented in Irish law.
“We do not support this approach as we are financially unable to take on lease agreements agreed by the company due to the dramatic downturn in business and are also being asked to provide personal guarantees,” he said.
Mr Holohan argued that the company is attempting to “saddle” franchisees with its debts.
The company leases all of its outlets directly from their landlords, and sublets them on to the franchisees who run the individual businesses.
It has been seeking to transfer the head leases from the company to the franchisees with their agreement, while at the same time negotiating rent reductions with its landlords. It recently wrote to franchisees stating that the examiner, Paul McCann of Grant Thornton, would ask the High Court to “repudiate” those leases which had not been transferred by the 15th of this month.
If it succeeds in having the head leases repudiated, this will effectively transfer the leases to the franchisees. The company warned two weeks ago that if this happens, franchisees might not benefit from any rent reductions that it has negotiated.
The company is due in the High Court today to begin those proceedings. If it does not succeed, AIL has said it will not go ahead with its investment, and the business could be liquidated or placed in receivership.
Mr Beere recently wrote to franchisees warning that they would still be liable for their side of the franchise agreements should the company be liquidated or placed in receivership.
He also pointed out that in either situation, it was likely that the franchise agreements would be sold.
Difficulty with leases was one of a number of factors that pushed O’Brien’s Irish Sandwich Bars into insolvency earlier this year and forced the company to seek High Court protection from its creditors and to have an examiner appointed.
Businessman Brody Sweeney controls the company. If the AIL investment goes ahead, it will take over the Irish business, while Mr Sweeney will keep its UK operations.
The English courts placed two of its UK-registered companies under administration, but its UK franchising business is not affected. O’Brien’s outlets in both countries are continuing to trade.
