Michael Braga writes in the Sarasota Herald Tribune that Bill Daly swept down from Massachusetts two years ago with the goal of expanding his Dunkin’ Donuts franchise.
For $11.15 million, he was able to buy a majority stake in the largest Dunkin’ Donuts chain on Florida’s west coast — a chain with 18 stores from Bradenton to Punta Gorda and a bakery large enough to service twice as many eateries.
After closing the deal in August 2007, Daly announced he would build 26 new outlets in five years and would eventually increase his Florida payroll from 200 to 1,000 people.
But like so many other ambitious businessmen who tried to expand in the aftermath of the housing bubble, Daly’s plans were shredded by the worst recession since the 1930s.
In June, his company — AlphaRock LLC — filed for Chapter 11 bankruptcy protection, revealing more than $9 million in debts.
“The recession has significantly impacted the consumer market and is being felt by retail restaurants, suppliers and other vendors,” court documents filed by Daly’s company state. “For the fiscal year ended Dec. 27, 2008, the debtors experienced a net loss of approximately $3.1 million.”
Daly did not return a call seeking comment.
Court documents filed by his company show his new goals are to get his landlords, suppliers and lenders to let him out of leases and forgive some of his obligations so he does not have to shut down restaurants and leave the state.
In his company’s plan of reorganization, Daly claims it would be in the interest of creditors to help his company survive.
Getting his plan approved by the bankruptcy court, however, may not be easy. Some of his creditors are in just as much need of relief as Daly himself. They were expecting his company to continue making lease and interest payments, and Daly’s attempts to get out of those commitments will be painful.
Besides CIT Group, the deeply troubled small business lender the provided Daly with a $9 million loan to finance his purchase, the people with the most to lose through bankruptcy process are Marvin Kaplan, Kevin Millard and Shawn Cabral, Sarasota businessmen who sold Daly the chain and continue to hold at least six of the leases that Daly is trying to renegotiate or cancel.
Kaplan, a well-known Sarasota real estate investor and developer, has been having his own financial problems.
During the past 12 months, court records show he has stopped making interest payments on five loans totaling $12.1 million, while former partners and others he has done business with have been unable to repay him more than $3.2 million.
Efforts by Daly’s company to get out of leases has only made Kaplan’s situation more difficult.
“It’s been a problem,” Kaplan said.
In March 2008, Kaplan’s company, KMS II, sued Daly’s company in Sarasota County circuit court, accusing Daly’s company of trying to get out of two store leases in Wauchula and Punta Gorda that would have generated $170,000 in annual rents.
Kaplan and his partners, who spent $1.2 million to build the Wauchula store, argued that the leases were part of a six-store expansion plan that Daly agreed to in his original sales contract.
But Daly countered in court documents that he made no such agreement. In fact, he said that lawyers on both sides confirmed that reference to the two leases were not to be included in the sales agreement.
The case was set to go to trial in July. But Daly’s bankruptcy filing put a stop to that.
The following month, Daly shut down two restaurants in Sarasota and Port Charlotte that provided Kaplan and his partners with $216,000 in annual rents.
“The debtor believes that the leased premises are not desirable for a number of reasons, including reduced spending by consumers in this market and that rent payable to (Kaplan’s company) pursuant to the lease represents an above market rate for the location,” court documents filed by Daly’s lawyers state.
The bankruptcy court sided with Daly and declared the leases void.
But that does not mean Daly will get out of all his financial obligations with regard to Kaplan and his partners.
“We can line up with the other unsecured creditors and have a shot at getting back some of the money, maybe 10 to 20 cents on the dollar,” Kaplan said.
In the meantime, Kaplan and his partners still have to make monthly interest payments on the $2 million in loans they received from Sarasota’s LandMark Bank to buy the two restaurants that Daly’s company vacated.
Kaplan said is he is looking for tenants to fill the space.
“It’s a tough one,” Kaplan said. “They had an awfully big nut to crack. We understand that. They have triple the debt that we had when we owned the chain.”