Saladworks, LLC files Chapter 11 in Delaware

Morris James LLP

On February 17, 2015, Saladworks, LLC filed a chapter 11 bankruptcy case in Delaware.  The case has been docketed as case no. 15-10327 and has been assigned to The Honorable Laurie Selber Silverstein.

The petition lists assets and liabilities between $10 million and $50 million.  According to the Declaration of Paul Steck (the “Steck Declaration”), President and member of Saladworks’ board of directors, filed in support of the petition and various first-day motions, Saladworks is the nation’s first and largest fresh-salad franchise concept.  The debtor is currently a party to 149 franchise agreements.  The debtor is also a party to 141 franchise agreements where the franchisee has not yet opened the franchise.

The debtor’s equity owners are J Scar Holdings, Inc. (70%) and JVSW LLC (30%).  According to the Steck Declaration, the debtor has no secured bank debt, and no other known properly secured debt obligations.  The debtor lists approximately $8.02 million in unsecured debt obligations including some $870,000 in trade obligations.

Nearly 2 years ago, in March 2013, JVSW sent a written Put Notice to the debtor demanding repurchase of JVSW’s 30% interest as wells as other demands.  Litigation was subsequently commenced in the Delaware Chancery Court.  In December 2014, Metro Bank commenced 3 separate lawsuits in Pennsylvania seeking amounts owed under various loan agreements.  In two of the cases, Metro Bank obtained confession of judgments in a total amount approaching $2 million.  Garnishments subsequently issued against Debtor’s bank and accounts have been frozen.  The debtor is seeking to overturn the confessed judgments.

In the bankruptcy case, the debtor will seek to sell its business and obtain a stalking horse bidder to set the floor for a successful auction.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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