The owner of seven Midas franchises in Tucson and Green Valley has filed for Chapter 11 reorganization in a bid to keep its franchise designation.
Selah Investment Group Inc., owned by Ron Tacker, is saddled with about $2.5 million in debt, bankruptcy attorney Eric Slocum Sparks said. Much of that debt is tied to back franchise fees, which are equal to 3 percent of each shop's monthly gross revenues. Sparks said Selah Investment Group is about four months behind in those fees.
"Midas has advised us that they are going to try to cancel or terminate the franchise agreement," Sparks said Tuesday. "We expect a fight with Midas over the franchise agreement."
Midas is an auto-repair chain that first opened in 1956 and has roughly 2,600 franchises, its Web site says. The company is publicly traded on the New York Stock Exchange.
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Selah Investment Group bought the Tucson locations for about $1.3 million in January 2008 from Elite Performance LLC. The Green Valley location was acquired soon after from Fletcher's Tire & Auto Service, Sparks said.
All of the stores are leased, and Selah Investment Group has stayed current with rent.
Sales have fallen by 22 percent in the recession from a few years ago, Sparks said. Staffing at the seven locations has been cut from 51 to 32.
Sparks said he expects the reorganization to be completed within a year and that Selah Investment Group plans to emerge with all 32 employees. But he also said there is a possibility some locations might close.
"We are going to have to take each individual store as a separate profit center," Sparks said. "We may be forced to close certain stores in order to keep the balance of those stores profitable."