COLD SPRING, Ky. -- Owners of more than 60 AmeriStop convenience store franchises around the Cincinnati area and in northern Kentucky are waiting for a Thursday court hearing that could determine the future of their businesses, reported The Cincinnati Enquirer.
In November, Petro Acquisitions Inc., the parent company of the Cold Spring, Ky.-based AmeriStop chain, filed for Chapter 11 bankruptcy, with debt estimated between $1 million and $100 million, according to court documents cited by the newspaper.
The hearing before U.S. Bankruptcy Court Judge Burton Perlman is expected to [image-nocss] determine whether the franchise agreement can be terminated and if the prime leases on 63 c-stores can be sold at auction to the highest bidder free and clear of any liens or sublease agreements.
Selling of the assets would go to pay off the more than $11.2 million that Petro Acquisitions owes to Wells Fargo Bank and Drawbridge Special Opportunities Fund for financing it received to pay for bankruptcy proceedings, the report said, citing court documents.
Franchise owner Todd Daniels, who along with his two brothers and father own franchise rights to stores in Blue Ash, Monroe, Trenton and Lebanon, said a decision to dissolve the franchise agreement and sell the prime leases could put him out of business.
Under the franchise agreement, Daniels and other franchise owners sublease stores from Petro Acquisitions and, in turn, the company leases the stores from area landlords.
Lease arrangements aside, all other property in the stores is owned by independent franchisees such as Daniels and his family, said the report.
"If they dissolve our franchise agreements, it basically opens up our leases to be sold to anyone, right out from underneath us," Daniels told the paper. It would then be the new prime leaseholder's decision whether to honor the previous sublease agreements, he added.
While the franchisees would have an opportunity to bid on the leases at auction, Daniels said it is unlikely they would win. "There's plenty of big chains out there that could come in and outbid us," he said.
Lawyer Marcia Andrew of Taft Stettinius & Hollister is hoping that the case doesn't get that far. On behalf of the franchisees, Andrew has argued that the motion to terminate the franchise agreement, and subsequently sell the prime leases, violates federal bankruptcy laws. "We have objected to the trustee's motion on a number of legal grounds, but the main one is that the franchisees have a right under federal bankruptcy code to remain in their subleases for the duration of those agreements," she told the paper. "That protection is provided for someone who is a tenant of an entity that goes bankrupt, which exactly applies to these franchisees who have invested quite a bit of their own money into their stores."
Losing the opportunity to operate in their current locations could severely hurt the value of the franchisees' assets, which they have worked years to build up, Andrews said.
For franchisee Joe Hancock—whose parents John and Esther founded what became the AmeriStop chain in the late 1960s—the move would be an immense loss. "Somebody could push us out of our stores and take our livelihood away from us for the benefit of a secured creditor," said Hancock, who owns interest in seven stores across the region. "That's what keeps us up at night."
Attorney Nick Cavalieri, who represents Wells Fargo and Drawbridge, said he thinks that the motion to terminate the franchise agreement and sell the prime leases is a valid course of action to repay the lenders. "Certainly, the franchisees have an argument about how they see the case," he told the paper. "Wells Fargo and Drawbridge would simply like to be paid what they are owed, and they have a certain responsibility to try to make that happen."
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