Long Island City, N.Y.
Catchy 1-800-MATTRES jingles couldn't pull in enough sales as the economy dipped. The well-known mattress company chipped away its operating costs, closing almost 20 showrooms and warehouses, before throwing in the towel and declaring bankruptcy in mid-March.
Dial-A-Mattress filed for Chapter 7 -- the kind that involves liquidation -- before switching several days later to Chapter 11 bankruptcy, which gave it a shot at rehabilitation. The company tried to sell its assets to competitor Sleepy's that same month, but one of its franchisees attempted to scuttle the sale. Consolidated Mattress Co., a franchisee that operates 1-800-Mattress' telemarketing business in certain regions, objected to the deal because it gave Sleepy's the option of rejecting existing franchise agreements.
1-800-Mattress went to auction in May and Sleepy's won with a bid of $25 million. The bankruptcy court approved the sale, adding that if Sleepy's chose to reject franchise agreements, that would be an appropriate business judgment decision. Franchisees are waiting for the next shoe to drop.
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