Wendy's (NASDAQ:WEN) wants to block the acquisition of a bankrupt franchisee's restaurants by a competing bidder, so together with a group of other franchisees, the burger joint submitted its own offer on Wednesday.

Should its bid be successful, Wendy's says the franchisees in the consortium will own most of the restaurants and it will retain at most just two markets.

Wendy's restaurant

Image source: Wendy's.

NPC Quality Burgers is the largest Wendy's franchisee, with almost 400 restaurants, but it also operates around 1,200 Pizza Huts. It was struggling before the pandemic as Pizza Hut owner Yum! Brands (NYSE:YUM) sought to turn around the chain, but ultimately sought the protection of bankruptcy courts in July. 

Rival restaurant operator Flynn Restaurant Group submitted an $816 million stalking horse bid for all of NPC's restaurants, but Wendy's objected to the potential sale because Flynn operates restaurants in competing chains including Applebee's, Arby's, Panera, and Taco Bell. Wendy's franchise agreements stipulate a franchisee cannot own a rival concept.

A stalking horse bid is one that sets a floor for any competing offers.

While a sale of NPC is expected to be completed by Dec. 4, Wendy's said if it wins the auction, the consortium of pre-qualified franchisees will take the lion's share of the 393 Wendy's restaurants in eight markets up for sale. After years of refranchising its chain, or selling company-owned restaurants to franchisees, Wendy's says it remains committed to owning no more than 5% of the restaurants in operation.

Pizza Hut has also asked the court to be able to vet potential buyers of NPC.

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