Carl’s Jr. Keeps Sponsorship Deal With Phoenix Suns

Fast-food chain Carl’s Jr. will continue to cook up the “official burger” of the Phoenix Suns basketball team even though a bankrupt franchisee that bought that promotional right has fallen behind on monthly sponsorship payments.

Lawyers who put the Carl’s Jr. franchisee, which operates 85 restaurants in Texas and Arizona, into chapter 11 last year have struck a deal with Phoenix Suns officials that will preserve the fast-food chain’s affiliation while it searches for buyers.

The Carl’s Jr. operator, which is partly owned by founder Carl Karcher’s three grandchildren, made a sponsorship deal with the team in August 2013, giving it access to game tickets, advertising in programs, mentions during games and appearances by players, dancers and the Suns Gorilla team mascot. Carl’s Jr. also sponsors the Phoenix Mercury women’s basketball team.

That sponsorship deal happened well before the franchise hit financial troubles so deep that it needed to turn to bankruptcy. Frontier Star LLC filed for chapter 11 protection  in July, blaming escalating food costs, minimum wage increases and the financial consequences of the Affordable Care Act.

In September, the franchise operator fell behind on payments to the team required under the sponsorship deal, putting the sponsorship in jeopardy.

Under the recent deal, the affiliation lives a little longer. As part of the bargain, the Carl’s Jr. operator agreed to return 288 game tickets and 132 parking passes for the 2015-2016 Phoenix Suns season. Team officials are also trying to sell its TV and radio spots to others.

Keeping the sponsorship deal intact, the Carl’s Jr. franchisee lawyers said in court papers, could make the company more attractive to potential buyers. Several investors are circling, according to court documents filed in U.S. Bankruptcy Court in Phoenix.

The Arizona franchise operator and its affiliates are also preparing to sell their 79 Hardee’s restaurants in Illinois, Indiana, Missouri, Kentucky and Tennessee. The restaurants altogether employ more than 3,700 people, according to court papers.

A potential sale could wipe out the 40% ownership stake in the restaurant operator held by Mr. Karcher’s grandchildren: Carl LeVecke, Jason LeVecke, and Margaret R. Edgar. The rest of the ownership, per a 2010 agreement, is held by investor Eric Lester.

The sponsorship deal’s new terms still need approval from U.S. Bankruptcy Court Judge Eddward P. Ballinger Jr.

Write to Katy Stech at [email protected].Follow her on Twitter at @KatyStech