Wendy’s confirmed Thursday that it will make a bid for nearly 400 of its restaurants operated by bankrupt franchisee NPC International, according to an SEC filing.

The fast-food chain said it submitted a consortium bid along with a group of pre-qualified franchisees. If the bid is successful, Wendy’s expects the franchisees to control most of the markets, while Wendy’s takes over one or two at the most. NPC currently operates roughly 393 Wendy’s locations across eight markets.

NPC, which declared bankruptcy on July 1, also oversees about 900 Pizza Hut units after slashing up to 300 underperforming locations.

The sales process has proven to be contentious. According to court documents, 26 active potential buyers have conducted due diligence for the Wendy’s assets and 32 active potential buyers have conducted due diligence for the purchase of the Pizza Hut assets.

Earlier in November, Flynn Restaurant Group—the operator of Taco Bell, Panera, Applebee’s, and Arby’s—submitted an $816 million bid to acquire both the Pizza Hut and Wendy’s assets. It was approved as the stalking horse bidder, which means it sets the pace for the other bids.

In response, Wendy’s filed a limited objection and has refused to give consent for Flynn to take over the hundreds of Wendy’s stores. As part of the bidding protections, Flynn could receive up to a $20.4 million break-up fee—a figure that any competing bid would have to overcome. Wendy’s said the bidding protections are “more likely to chill bidding than encourage it.”

Wendy’s also disapproved of Flynn operating Arby’s and Panera locations because it views the two brands as competition. Flynn oversees 369 Arby’s locations and 137 Panera units. Wendy’s said that in similar situations, potential franchisees have sold competing assets, but Flynn has indicated that it won’t do the same. The fast-food chain also said it hasn’t reached a final agreement on personal guarantees, reimaging and development obligations, store count limitations, or maximum leverage requirements.

Flynn said that each of the issues are solvable. The operator argued that Wendy’s has allowed other franchisees to operate Arby’s and Panera units and also said more than 363 of NPC’s franchise agreements don’t name Arby’s or Panera as competitors. Additionally, Flynn said it has agreed to invest significant capital in both Wendy’s and Pizza Hut and other negotiated terms like accelerated schedules for restaurant development, renovations, guarantees, and “operating covenants designed to alleviate stated competitive concerns and concerns about the relative size of the Flynn restaurant portfolio.”

Fast Food, Finance, Franchising, Story, Wendy's