RMH Franchise Holdings – Applebee’s Objects to “Complete Travesty” of Plan, Cites Foul Over Non-Payment of $14 million in Cure Costs

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October 29, 2018 – Dine Brands Global, Inc. and its subsidiaries, Applebee’s Restaurants LLC and Applebee’s Franchisor LLC (collectively, “Applebee’s”) filed an objection [Docket No. 693] to RMH Franchise Holdings’ First Amended Joint Chapter 11 Plan of Reorganization [Docket No. 618]. Applebee asserts, “The Debtors comprise the second largest franchisee in the nation-wide system of Applebee’s restaurants. They rejected the business plan and operating guidelines that other Applebee’s franchisees accept. They refused to pay royalties and advertising fees that other Applebee’s franchisees pay. Their Plan is predicated on assuming what Applebee’s contends are terminated franchise agreements (the ‘Franchise Agreements’) and operating under those Franchise Agreements without paying their delinquent royalties and fees while they litigate against Applebee’s to avoid paying those fees and for damages. They propose to skip over more than $14 million in cure payments to Applebee’s, yet even after their shareholders contribute $10 million to buy back their interests (without the requisite marketing), most or all of their available cash will be consumed on the Effective Date, with none going to Applebee’s to cure defaults under the Franchise Agreements. By the Debtors’ own admission, their Plan is not confirmable if they are compelled to cure their defaults to Applebee’s prior to assumption of the Franchise Agreements.

Not only are the Debtors unable to cure defaults promptly, they have no ability or intention to do so ever. Rather, the success of the Plan is entirely dependent upon prevailing in their litigation against Applebee’s; if they do not like the outcome, the Plan purports to permit them simply to then reject the Franchise Agreements that they had assumed with the supposed promise of a prompt cure and future performance. And so Applebee’s suffers the double injury of receiving no recovery under the Plan for their cure obligations after being stuck in an involuntary franchise relationship with a recalcitrant, terminated and litigious franchisee, to the detriment of its national franchise network. For these and other reasons, the Plan is a complete travesty, and its confirmation would violate the Bankruptcy Code, be fundamentally unfair to Applebee’s and its franchisees, and undermine basic principles of franchise law.”

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