Kelsey's and Montana's: two profitable restaurants filed anyway

1382769 Ontario Limited operates a Kelsey's Gardiners Restaurant. 1622356 Ontario Limited operates a Montana's Restaurant. They occupy adjacent leased premises at the RioCan Centre Mall, 650 Gardiners Road, Kingston, share a director in Mr. Timothy Lloyd, and employ about fifty people each — a hundred in total.

Both filed notices of intention to make a proposal on May 1, 2026, with Albert Gelman Inc. as trustee, per First Report of the Proposal Trustee, May 17, 2026, paras. 1, 8–10.

The stated objective is "to create a stabilized environment to allow the Companies to pursue a going-concern transaction pursuant to a court-supervised sale and investment solicitation process", with a further motion to approve the SISP to come, per First Report, May 17, 2026, para. 2.

The forecasts are positive

Here is what makes this filing unusual.

Both companies prepared fifteen-week cash flow forecasts to August 16, 2026, filed with the Official Receiver on May 8. Both project a net cash inflow, per First Report, May 17, 2026, paras. 21–24:

• Kelsey's: receipts of approximately $1 million, disbursements of approximately $0.9 million — a net inflow of $89,067
• Montana's: receipts of approximately $1.4 million, disbursements of approximately $1.3 million — a net inflow of $109,328

And those forecasts already include the restructuring costs, "including reasonable professional fees in connection with the Companies' NOI Proceedings".

So two restaurants that will take in about $2.4 million over the summer, spend about $2.2 million running themselves and paying for their own insolvency proceeding, and finish nearly $200,000 ahead. On a week-to-week basis they work.

Insolvency is not the same as unprofitability. A business can cover every cost it incurs going forward and still be unable to pay what it already owes — and a company in that position has exactly two options: negotiate with the people it owes, or be enforced against by them. The NOI is how you get the first without the second.

What they owe

The creditor picture is short, and the ranking of the items explains the filing, per First Report, May 17, 2026, paras. 12–15.

The Crown. As of the filing date, the CRA claims that both companies are indebted to it for (a) harmonized sales tax collected but not remitted, and (b) unpaid corporate taxes. The trustee is in the process of confirming those amounts with management.

The franchisor. Recipe Unlimited Corporation has a PPSA registration against each company, "against all collateral descriptions, with the exception of consumer goods". RUC is the franchisor of both restaurants.

A bank. Kelsey's estimates it owes approximately $100,000 to the Bank of Nova Scotia, unsecured.

Uncollected HST is the item that pushes an operating restaurant into insolvency more often than any other. It is money the business held for the Crown, spent on payroll and suppliers in a difficult month, and then could not replace — and it accumulates silently until it is a number no margin can cover. A restaurant that is $90,000 ahead over fifteen weeks cannot repay several years of unremitted tax out of trading.

The franchisor holds everything

The Recipe Unlimited registration is worth dwelling on, because it defines what a sale of these businesses can look like.

A franchisee's assets are a lease, some equipment, a workforce, and the right to operate under a brand. The brand is not owned; it is licensed. And here the franchisor holds security over all present and after-acquired collateral except consumer goods — which in practice means everything the businesses have.