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Spicy Pickle defaults on its debt

A Denver-based sandwich chain is in a pickle.

Spicy Pickle, the fast-casual bakery/café chain, in early February said it had defaulted on $4.8 million in loans from a pair of investors. Those investors demanded immediate payment, forcing the dwindling chain to close six of its seven company-owned locations. The company called itself “insolvent” in an SEC filing.

Those locations were then put up for an auction just two weeks later, in late February, after this edition went to press. Everything, including fixtures and chairs, were sold to the highest bidder—a highly unusual step for a restaurant chain. Yet Spicy Pickle is not your typical restaurant chain.

The concept was founded in 1999 and in 2007 brought aboard Marc German, a former pretzel chain executive, to help the company expand through franchising. It also started selling stock. At its peak, the company had 40 stores and agreements to open another 50. Yet sales have plunged. Franchisees didn’t open units, or closed existing restaurants, and the restaurant chain has dwindled in size—it has 23 locations now, at most. Its stock, once trading at $2 a share, can be bought for one cent. It has accumulated losses of $19.9 million. That’s quite a bit for a company that brings in about $4 million in revenue a year.  It lost $2.6 million in the first nine months of 2011. The company has not filed for bankruptcy


Gemini Invests in Garbanzo

Could Mediterranean be the next big thing? Gemini Investors thinks so. The Massachusetts-based private-equity group has invested in Garbanzo Mediterranean Grill, a fast-casual concept out of Denver that plans to grow through franchising.

The deal, according to Garbanzo’s founder, Alon Mor, will help the company invest in franchise expansion outside of its home state of Colorado. And Bob Bafundo, Garbanzo’s director of operations and franchise development, said interest in the chain has grown. The company is planning to open its first franchise markets later this year.

Garbanzo has a menu of healthy Mediterranean items. Diners can customize their meals with items like pitas, laffa, falafel, shwarma, hummus, seasoned rice, sauces and dressings. Some ingredients are imported from the Mediterranean. Matthew Keis, managing director at Gemini, said the private equity group was attracted to its leading position in the Mediterranean niche, and that the company has been paving the way from Day One to become a big national concept.


FranWorks buys Elephant & Castle

FranWorks Group of companies, the Canadian operator of bar & grill and pub chains, announced a $22.75 million deal to acquire the Boston-based Elephant & Castle Group. Elephant & Castle operates and franchises British-style pubs in the U.S. and Canada.

The chain went bankrupt last year, saying that falling sales in the aftermath of the recession made it unable to pay off its debt. For FranWorks, the purchase of Elephant & Castle will give the company a foothold for growth in the eastern U.S., said Derek Doke, FranWorks’ founder and CEO.


Benetrends opens West Coast Office

Benetrends, the business financing firm that specializes in the use of retirement funds to start small businesses, has opened a new office in Coronado, California. The office represents a return of sorts to the company’s original home—Benetrends was founded in San Diego but later moved to North Wales, Pennsylvania, where it’s now headquartered.

The deal will enable Benetrends to solidify its nationwide reach. “We saw a need to be closer to our clients and an opportunity to expand our business,” Benetrends founder Len Fischer said. Steve Stovall will be the account executive at the new Coronado location.

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