Anytime an individual or business is struggling to stay afloat, they may consider bankruptcy as a viable option. Gigi’s Cupcakes, a cupcake chain based in Texas, recently filed for Chapter 11 bankruptcy protection after facing multiple lawsuits. Gigi’s apparently has multiple shops in Texas, in places such as Dallas and Fort Worth, and operates dozens of franchises all across the country.
Gina ‘Gigi’ Butler apparently started the business in Nashville in 2008 and in 2016, sold it to FundCorp, an investment firm in Fort Worth, for $6 million. However, 18 of her franchisees filed a lawsuit against her, as well as her business partner and parent companies, for financial misrepresentations that negatively affected the franchisees chances for success. According to the lawsuit, Gigi’s defrauded the franchisees by failing to provide accurate labor numbers. One franchisee says he invested $700,000 to $800,000 to open two stores but had to find a full-time job when shop sales continuously declined.
According to a representative of Gigi’s, Gigi’s decided to file for bankruptcy due to the inability to resolve issues that existed when the brand was acquired. However, no shops will be closed and the office says that customers will not be affected by the filing. By filing for Chapter 11 bankruptcy, the company hopes to rebrand and strengthen the franchise system. Butler is currently promoting her new book as the parent company begins to rebuild.
Chapter 11 bankruptcy allows struggling business the opportunity to reorganize their affairs and restructure their debts. Many businesses that filed for Chapter 11 bankruptcy were able to continue on with business as usual as they work behind the scenes to regroup and work to become profitable once again.