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Tuesday night, vitamin and dietary supplement company, GNC Holdings Inc., filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware. Immediate plans include searching for a buyer and shuttering up to 20% of their retail stores, which could lead to nearly 1,200 closures across the U.S. 

GNC’s bankruptcy follows last month’s high-profile bankruptcy of rental car giant, Hertz Global Holdings, Inc. The GNC and Hertz bankruptcies are just a few of the recent large corporate bankruptcies stemming from the global impact of the COVID-19 pandemic with immense impact to owners of commercial real estate nationwide and their franchisees. 

The Pandemic’s Impact

Over the past several months, roughly 30% of GNC’s stores in the U.S. and Canada were forced to temporarily close. Although the company did have nearly $1 billion of debt prior to the start of the COVID-19 pandemic, nationwide stay-at-home orders led to a rapid decrease in sales at its brick-and-mortar stores. 

GNC’s first-quarter earnings report shows losses of roughly $200 million, which is significantly more than the $15 million it lost during the same time period in 2019. This radical decline in profits prevented the company from accomplishing its refinancing plans because of the abrupt “dramatic negative impact” on its business. GNC did obtain $130 million in new financing from vitamin supplier IVC, one of their largest vendors, to help it restructure, with hopes of emerging from bankruptcy this fall.

The Impact to Commercial Real Estate Owners

With plans to close 1,200 locations, it is inevitable that many landlords’ rights will be impacted, so it is important that you take immediate action. Whether the Debtors plan to assume or reject your lease, you have certain rights and obligations under the terms of the Bankruptcy Code.

Should the Debtors decide to reject your lease and shutter your location, it is imperative that you have a hand in the process to protect your other tenants from eye-sore “GOB” sale signs, abandoned storefronts and other items that could diminish the value of the shopping center to your remaining tenants. You may wish to immediately market the property to cover your losses and obtain a new tenant as soon as possible. It is also pertinent that you file a proof of claim asserting the proper amounts owed to you as a result of such rejection. 

Should the Debtors desire to assume and assign your lease, you have certain rights as a landlord under the Bankruptcy Code. Typically, the Debtors must cure all defects under the lease prior to such assignment and assumption. Such defects may include unpaid rent, real estate property taxes, and other applicable violations under the lease. There may be substantial negotiations from the Debtors on the terms of such assumptions and assignments as well. 

The Impact to GNC Franchisees

The GNC bankruptcy filing could affect hundreds of GNC franchisees. A lot is to be learned as GNC proceeds through the process, but the GNC franchisees should be preparing for the what-ifs. Does the franchisee still have to pay the franchisor and perform under the Franchise Agreement? Under Chapter 11, GNC may have the right to reject or assume the Franchise Agreements, and each has various potential ramifications. What if a franchisee has a dispute with the franchisor, will it still be able to make a claim? If a franchisee is already in a dispute with the franchisor, will the bankruptcy stay affect the matter? GNC’s Chapter 11 filing will most likely maintain the franchise system, but franchisees should be prepared for the what-ifs.

We Are Here to Help

Reger Rizzo & Darnall regularly assists shopping center and mall owners, developers, and other parties in interest in some of the world’s largest bankruptcy filings. Our team of bankruptcy attorneys stand ready to assist you and can answer any questions you may have regarding the GNC Chapter 11 filing. For questions or immediate assistance, please contact us at 215-495-6552; or as to franchise issues, please contact Harris J. Chernow at 215-495-6532 or via email at