Illinois concept Meatheads Burgers & Fries declared bankruptcy, but lender LQD Financial Corp. is calling it a “stunt” and asking for it to be dismissed.
The 13-unit Meatheads and parent company Crave Brands were placed into bankruptcy by Steve Karfaridis. LQD alleges in a separate filing that after the company went into default, LQD exercised certain rights to remove Karfaridis as manager, and that he turned to bankruptcy as a way to stay in charge.
In fact, LQD claims the bankruptcy was filed roughly 30 minutes after it replaced Karfaridis as manager and that the timing was “coordinated to frustrate LQD’s exercise of its rights.” Even though it wasn’t required to do so, LQD said it informed Karfaridis’ counsel that he was no longer manager, but the bankruptcy was filed anyway.
LQD said dismissal best serves all creditors and the restaurant because Karfaridis has a history of mismanaging the restaurant and failing to pay lenders in a timely fashion. In February 2019, LQD advanced $6.65 million to Crave and Meatheads to allow Karfaridis and putative CFO Michael Webb to acquire the entities. LQD argues that Karfaridis and Webb put none of their own funds into the acquisition and have been misusing funds for their personal benefit, including personal travel and unrelated business expenses.
The lender claims that even prior to COVID’s arrival, the business experienced losses, couldn’t pay creditors on time, and incurred a state tax lien of several hundred thousand dollars. Because of the mismanagement, Crave and Meatheads retained consultants to help manage operations, but those consultants are no longer working for them.
“Thus Karfaridis and Webb are left with undertakings they are singularly unfit to perform,” LQD said in its filing.
LQD said that if the bankruptcy case is dismissed, it will sell the assets to a “well-known and reputable new operator with the know-how and competence to manage the restaurants and ensure payment to creditors.” The lender warned that if the bankruptcy remains, Karfaridis will “continue to dissipate value resulting in detriment to creditors and Karfaridis himself.”
Meatheads currently has 75 full-time and 86 part-time employees. It listed liabilities of $8.4 million and assets of $6.7 million. It received a Paycheck Protection Program loan worth $982,112 in 2020 and another valued at $1,438,844 in 2021. Crave received an Economic Injury Disaster Loan worth $149,900.
The burger chain was founded by former Potbelly executive Tom Jednorowicz in 2007. He sold the company in 2019 when the chain had more than 400 employees and 17 locations.