Pioneer Take-Out Corp., the fried chicken chain in the midst of an ownership battle, on Monday filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
The company said it expected its nearly 270 restaurants, which are mainly in Southern California, to remain open as it seeks to reorganize under court protection from creditors.
"I am confident that we will emerge from this as a healthy, financially sound company," said H. R. (Rick) Kaufman, founder of the 26-year-old company.
Los Angeles-based Pioneer filed for protection following a clash last week between Kaufman and an investment group, headed by former California legislator Terrence B. Goggin, that bought the troubled franchise operation a month ago.
Kaufman returned to claim control of the company after Goggin's group failed to make a required payment, which gave Kaufman the right to go ahead with the bankruptcy filing, his attorneys say. Goggin has said he withheld a $100,000 payment as part of a dispute over how Kaufman handled rent money from franchises.
After the dispute began, Kaufman stationed security guards at Pioneer's mid-Wilshire headquarters to keep Goggin and his staff out. Goggin retaliated by ordering corporate staff to report to new offices and instructing franchisees not to mail any royalty, rent and advertising expense checks to Kaufman. He also threatened to go to court to stop Kaufman.
Kaufman claims Goggin failed to pay landlords and vendors, making it necessary to file for bankruptcy protection.
TransPacific Industries Corp., a company controlled by Kaufman, "definitely believes had Mr. Goggin's group honored its legal commitment under the purchase agreement that this move might not have been necessary at all," said Leonard Venger, an attorney representing Kaufman. Goggin was not available for comment.
Both sides tried to negotiate a settlement last week, but failed to reach an agreement, Venger said.
Many franchisees said they were pleased to see Kaufman sell the company in December. A group of franchisees that owns 44 stores has sued the firm, claiming they had bought the franchises based on fraudulent information. Theyalso alleged that Pioneer funds were inappropriately loaned to some of Kaufman's other businesses.
Kaufman has denied the charges.