Bankruptcy Court Approves Sale of 28 Bagel Shops

As many Rockland County businesses know, longevity is not always a guard against financial adversity. After opening the first Bruegger’s Bagels shop in Rochester in 1983, the nation’s oldest Brueggers’ Bagels franchisee filed for Chapter 11 protection in March 2016. Now, the franchisee is proposing to sell its remaining shops to emerge from Chapter 11.

The franchisee, Flour City Bagels, LLC, opened its first Bruegger’s shop in Rochester in 1983. The Rochester shop was the country’s first Bruegger’s Bagel shop. In the ensuing 33 years, Flour City added 31 more locations in Albany, Syracuse and Rochester. By the time that it was forced into bankruptcy, Flour City had amassed $10 million in debts owed to more than 200 creditors. The company employed 385 hourly workers and 40 salaried workers.

According to the plan of reorganization recently approved by the bankruptcy court in Rochester, Flour City will sell its remaining 28 franchised locations to a subsidiary of Bruegger’s Enterprises, Inc., the parent company, for $4.6 million. The parent company operates 260 Bruegger’s shops across the country. According to the president of Bruegger’s Enterprises, the deal allows the company to “retain a cherished part of its heritage.” The company plans to invest about $1 million to improve the 28 stores, but the nature of the upgrades has not been disclosed.

The proceeds of the sale will presumably be used by Flour City to pay a portion of the sums that it owes to creditors, but the ultimate fate of Flour City was not disclosed. This case demonstrates how a Chapter 11 plan of reorganization can provide a method of converting the debtor’s assets to cash that can be used to pay creditor’s claims.