In the latest TMA Chicago Midwest Podcast episode, I sat down with Dan Dooley, President and Chief Executive Officer of MorrisAnderson. As a seasoned professional in the distressed franchise industry, Dan's extensive experience includes working with well-known fast-food brands and serving as a Past President of the TMA Chicago Midwest Chapter.
During our conversation, Dan delved into the unique challenges of franchise workouts, mostly due to the existence and power of the franchisor and the franchise agreement, which turns any franchise workout into a three-party affair between the franchisor, franchisee and lender. Much of Dan's franchise work focuses on restaurants. He noted these businesses are relatively straight forward. Common concerns focus on location, rent, labor, food costs and overhead. Dan went on to explain why Quick Service Restaurants (QSRs) face the most significant challenges, particularly with rising labor costs, and said he predicts a shift toward more kiosk-style operations to improve efficiencies and reduce overhead costs.
Dan also explained the different concerns among stakeholders in franchise workouts. For franchisees, survival and minimizing personal guarantee risks are paramount. On the other hand, franchisors prioritize keeping restaurants open to maintain their "tax base" from royalty and marketing fund payments. Lenders are primarily concerned about repayment and often prefer strategies that restore cash flow and going concern value since very little recovery results from a liquidation. Dan added that the unique position of the franchisor and the importance of the underlying franchise agreement pose additional challenges for distressed sales because they often require the franchisor's consent. Additional regulatory considerations like liquor license transfers can further complicate these sales.
Finally, Dan reflected on his time as President of the TMA Chicago Midwest Chapter and highlighted the benefits of volunteering with professional organizations such as TMA, including the opportunity it provides to network and build name recognition with potential future clients. He also emphasized the importance of contributing to the sustainability of the insolvency and restructuring profession. However, Dan shared that it was equally important to know when to step aside to allow new talent and leadership to emerge within the industry.
Listen to the full episode below.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.