Dunn's Dairy Queen Inc., which had been sued recently for delinquent sales taxes, advertising payments and franchise fees, filed a bankruptcy reorganization petition Wednesday in federal court in Oklahoma City.
With 29 stores in Oklahoma City and central Oklahoma, Dunn's is one of the nation's largest franchisees of Dairy Queen restaurants.
Dunn's, 531 N Ann Arbor, reported liabilities of $2.8 million and assets of $4 million in the bankruptcy petition. A company that owns all of Dunn's stock, D.Q. Enterprises Inc., also filed a reorganization case, listing $183,999 of liabilities and $1.1 million of assets.
Daniel K. Borgen, president of both debtor companies, said in a news release that the filings were prompted by a dispute with Dunn's former owner and problems existing when D.Q. Enterprises acquired Dunn's last May. Borgen said Dunn's has been paying trade creditors on a "pay-as-you-go basis," retiring debts and is nearing agreement with the Dairy Queen franchisor about the unpaid franchisee fees.
But the Dunn's petition included trade creditors among the 20 largest unsecured parties with unpaid claims. Borgen said a month ago he was within a week of settling the dispute with the franchisor.
Borgen said in a news release Wednesday that major trade creditors have agreed to continue to supply the company. Bankruptcy reorganization provides a debtor protection from creditor lawsuits while it remains in business and tries to restructure its obligations in a way that they can be paid from operations.
American Dairy Queen Corp., the franchisor, sued Dunn's, D.Q. Enterprises, Crumes H. and Ruth Adele Dunn, and Allie E. McLean on Nov. 28 in federal court in Oklahoma City. The plaintiff said Dunn's owed franchisee fees due since June and that the Dunns and McLean, who is Ruth Dunn's mother, did not pay $61,896 owed American Dairy Queen for sale of the franchisee's stock to D.Q. Enterprises in May.
The Dunn's bankruptcy petition listed an unsecured debt of $146,815 to International Dairy Queen Inc. of Minneapolis, Minn. The Dunns would not comment about the suit in November, saying they were no longer involved in the company's affairs. Borgen said then he was negotiating the matters with the plaintiff with the expectation of announcing a settlement within days.