Segment: Family Dining
NFS was engaged to sell a group of nine Denny’s in the New England area. The leases on several of the units had less than ten years of property control. However, one location obtained a new 20-year lease, one location was slated to close and the other leases were factored into the valuation proposition.
Over the course of the marketing period, NFS obtained multiple offers from prospective and existing Denny’s franchisees. Ultimately an offer from an existing franchisee was accepted. Upon presentation to the franchisor (Denny’s. Inc.), NFS was notified that Denny’s intended upon exercising its Right of First Refusal. In NFS’s discussion with the franchisor, it became apparent that they were concerned about the reaction of the valued existing franchisee. While Denny’s had a duty to make the business decision to buy the stores, they recognized the importance of maintaining good relationships with the franchise community. The buyer had been known as a well-regarded franchisee that had in fact developed a number of new Denny’s. This led to the discussion and ultimate negotiation for Denny’s to purchase three units that were geographically correct for them, and for the buyer to purchase the six units in Maine, which provided a good base to support a Designated Operator. Through these negotiations the bifurcation of the Purchase Contract, pricing, and development rights were all established and put into a Purchase Contract Amendment that allowed one contract to provide simultaneous closing of both escrows.