The Franchisee
After failing to reach an agreement on how to proceed together, Wendy’s International revoked Robert Burda’s franchise licenses for his 13 locations in
Western Massachusetts. The action, says Wendy’s spokesman Denny Lynch,
came after repeated conversations with the franchisee. It also came amidst
mounting financial troubles for Burda:
• July 2 – California-based Capmark Finance files a suit in U.S. District
Court in Springfield, Mass., seeking to collect $4.6 million of a $6.4 million loan owed by Burda and his company, Sondocatt Investments, LLC.
According to the suit, Burda and Sondocatt borrowed the funds in September 1998 to buy five Wendy’s in the region and had not made a payment since April 1, 2007.
• Aug. 16 – A grand jury indicts Burda for 52 counts related to failure to pay employees, and on August 17 a warrant for his arrest is issued. Although Burda, who reportedly was back home in Ohio, returned to Massachusetts and surrendered voluntarily, he appeared at
his Aug. 29 arraignment in handcuffs and ankle chains. He pleaded innocent to all charges, made the $10,000 cash bail, and was due back
in court Nov. 27.
• Ongoing – Burda also was reported to have been delinquent in paying property taxes and meal taxes in some or all of the cities and towns
he operated in. Liens were placed on his properties by local municipal-ities for unpaid taxes and fees of about $150,000; and the state claimed
Burda owed about $480,000 in unpaid state meal taxes.
While the closings caught employees and customers unawares, that was
not the case at Wendy’s corporate in Dublin, Ohio. “We had been in conversations with Mr. Burda for a long time,” says Lynch. “This wasn’t a total
surprise.”
Because of the various franchising laws that require a step-by-step procedure when there are problems with a franchisee, the process took some time.
For example, says Lynch: if a franchisee defaults on its franchise contract, the
franchisor must serve notice and the franchisee has a specified period for remediation. If that is fulfilled, the franchisee can get an extension; and if not,
it’s still possible to negotiate extensions.
“This isn’t a sudden storm cloud that just appears out of nowhere. His status and situation were well known, yet he’s an independent business,” says
Lynch. “We did terminate his franchise rights after we could not reach an
agreement.”
As of early October, Burda had made no public statements in his defense,
other than to post bail and plead innocent to all charges. According to local media accounts, attorney Michael O. Jennings of Springfield, who
represented Burda in court, told the federal judge that Burda had been negotiating for weeks with Wendy’s to have corporate take over his franchises, and had gone so far as to hire an attorney to facilitate transfer of
ownership.
Jennings also said that on a Thursday “they were all at a meeting” talking
about Wendy’s taking over the franchises. The next day (July 20 was a Friday), Jennings said, Burda got a call from Wendy’s corporate headquarters
telling him to shut down the restaurants that day. “He had no choice,” Jennings said.
Before becoming a Wendy’s franchisee, Burda worked for Wendy’s corporate in the law department.
Timeline of Events
In the weeks and months surrounding the
revocation of Robert Burda’s franchise
rights, some key events stand out:
July 2 — Capmark Finance files a federal suit alleging that Robert Burda and
Sondocatt Investments owe $4.6 million
on a $6.4 million loan taken out in 1998 to
buy five Wendy’s restaurants, and had
not made a payment since April 1.
July 20 — All 13 Wendy’s restaurants in
Western Mass. abruptly close; Burda’s
franchise license revoked.
July 26 — Wendy’s announces it will
pay the former employees their back
wages; works with the state’s attorney
general in ensuing weeks to establish a
$350,000 gift fund.
Aug. 16 — Mass. grand jury indicts
Burda and Sondocatt for 52 counts of failing to pay employees.
Aug. 29 — In federal court, Burda
pleads innocent to all charges; released
on $10,000 bail; due back in court Nov. 27.
Sept 19, 20 — Real estate and equipment at the five Wendy’s restaurants
named in the Capmark lawsuit are auctioned off. Wendy’s International was the
winning bidder on three, and retained the
right of first refusal on the other two.
Sept. 28 — Mass. AG’s office mails
checks to 406 former employees, totaling
almost $192,000; more likely forthcoming.
Oct. 15 — First Wendy’s scheduled to
reopen in Western Mass. this week.
