Wendy's may withhold franchise permission from Flynn Restaurant in bankruptcy sale

[DUBLIN, OHIO] Wendy's Co may not give permission for Flynn Restaurant Group to become a franchisee of the Frosty seller, creating a potential roadblock for a US$816 million bankruptcy sale, a lawyer for the chain said in court Friday.

Flynn, the largest eatery franchisee in the US, was approved Friday as the so-called stalking horse bidder to buy about 1,300 Pizza Hut and Wendy's restaurants from bankrupt restaurant operator NPC International.

"We are not hopeful that we can grant consent to Flynn," lawyer Sean O'Neal of law firm Cleary Gottlieb Steen & Hamilton said on behalf of Wendy's.

The burger chain hasn't consented to Flynn buying the 394 locations in part because Flynn operates hundreds of competing restaurants including Arby's Restaurant Group and Panera Bread locations.

Wendy's and Pizza Hut have both asked for the right to vet potential franchisees in the bankruptcy sale.

Mr O'Neal said Wendy's and Flynn are in talks about the issue and Wendy's would give an answer by Thursday.

He added that regional Wendy's franchisees are forming a consortium that could make a competing bid for the locations.

LARGEST FRANCHISEE

"Wendy's is trying to put together a competing bid," NPC lawyer Ray Schrock of law firm Weil Gotshal & Manges said in court.

Federal bankruptcy judge David Jones on Friday approved Flynn as the so-called stalking horse bidder, setting a price floor for the bankruptcy sale.

There are at least 32 other potential buyers eyeing the restaurants, according to a court filing.

Flynn is the largest franchisee of eateries in the US with more than 1,200 locations.

Started in 1999 with casual dining chain Applebee's International Inc., Flynn has acquired other restaurant brands in recent years to diversify into fast food and fast-casual offerings.

BLOOMBERG