Hit by tax claims totaling $10 million, the owners of Medieval Times restaurant- entertainment franchises in Buena Park and Florida sought refuge in bankruptcy petitions Friday to stymie possible IRS seizures.
The Chapter 11 filings in U.S. Bankruptcy Court in Santa Ana leaves the franchisees in charge, so the jousting, sword play and other medieval entertainment will continue, said Eric Chiusolo, chief financial officer of Medieval Dinner & Tournament Inc. in Buena Park.
The Internal Revenue Service won federal tax court decisions last October requiring the Buena Park attraction to pay $7.5 million in back taxes and for Medieval Show Inc. in Kissimmee, Fla., to pay $2.5 million. Both amounts were for the 1987 to 1989 tax years.
The IRS contends that the companies took improper deductions for royalties, loan interest and management fees. Each company filed separate appeals this week with the U.S. Circuit Court of Appeals for their respective areas, asserting that the deductions were proper.
"One of the primary reasons for filing was to prevent the IRS from beginning to seize any assets," said Alan Friedman of Irvine, the bankruptcy lawyer for both franchises.
The tax battle doesn't affect five other Medieval Times operations in other states and Canada. Each franchise is owned by Dutch-based investor groups, often with overlapping partners, and all are managed out of Buena Park.
The brainchild of a Spanish family, each medieval-style "castle" features nightly re-creations of an actual jousting tournament that took place in 1093. Mounted atop Andalusian stallions, knights in shining armor and colored costumes battle with lances, swords and mace cheered on by as many as 1,120 customers who eat dinner while watching from seats in the coliseum setting.
The Buena Park castle, which opened in 1986, had as many as 700,000 patrons in one year in its early times. After slumping a bit, the Southern California attraction had 440,000 customers last year, Chiusolo said. The Florida castle, which opened in 1983, had a record 420,000 customers in 1996, he said.