Popular fast-food burger chain files for Chapter 11 bankruptcy
Fast-food restaurant chains have struggled in 2024 to generate adequate revenue as high interest rates, rising inflation, and shrinking consumer discretionary spending impact their businesses.
Depressed revenue has led to financial distress for many fast-food chains, and several have filed for Chapter 11 bankruptcy in the first three quarters of the year.
EYM Pizza, which operates about 140 Pizza Hut locations in Texas, Wisconsin and Ohio, didn't have enough revenue to pay its required royalties to Pizza Hut. The royalty shortfall led to a Pizza Hut lawsuit against the franchisee, which prompted EYM to file for Chapter 11 bankruptcy protection on July 22.
The bankruptcy filing places an automatic stay on any legal actions against the debtor during bankruptcy proceedings.
Another fast-food franchise operator Miracle Restaurant Group, which operates 25 Arby's restaurants in Illinois, Indiana, Texas, Mississippi, and Louisiana, on June 20 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the Eastern District of Louisiana to reorganize its business.
The franchisee had filed bankruptcy once before in 2010 when it operated 60 Arby's units. The restaurant operator's store count declined further from 45 to 25, as a combination of events impacted its business, such as the Covid-19 pandemic and inflationary pressures in commodity and labor expenses.
BurgerFi restaurant features a burger, fries, and chicken tenders on Aug. 20, 2024 in Arlington, Va. (Photo Illustration by Tierney L. Cross/Getty Images)
BurgerFi files bankruptcy after turnaround fails
BurgerFi International (BFI) , owner and franchisor of 144 burger and pizza restaurants nationwide, on Sept. 11 filed for Chapter 11 bankruptcy protection to reorganize after a turnaround plan that it implemented less than a year ago failed to produce necessary results to prevent the filing, according to a company statement.
"Despite the early positive indicators of the turnaround plan initiated less than a year ago, the legacy challenges facing the business necessitated today's filing," BurgerFi CEO Carl Bachmann said.
"We are grateful for the continued support of our loyal customers, vendors, business partners and our dedicated team members, who are the heart of the company," Bachman said.
The Fort Lauderdale, Fla., company's two brands, BurgerFi and Anthony's Coal Fired Pizza, faced a drastic decline in post-pandemic consumer spending amidst sustained inflation and increasing food and labor costs, requiring the company to stabilize the business in a structured process, according to company Chief Restructuring Officer Jeremy Rosenthal.
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Bachman was hired in July 2023, along with Chief Financial Officer Christopher E. Jones, to turn around and strengthen the company's brands and operations. The team developed a strategic plan to address declining same-store sales, high employee turnover and a stale menu, the statement said.
BurgerFi closed 19 underperforming corporate-owned locations and reduced related operating costs as part of its turnaround plan. The company currently lists 144 locations of its two brands with 76 franchised and 17 corporate-owned BurgerFi units and 50 corporate-owned Anthony's Coal Fired Pizza units and one dual-brand franchise.
The 77 franchisee-owned restaurants are not included in the Chapter 11 bankruptcy.
The debtor listed $50 million to $75 million in total assets and $100 million to $500 million in liabilities in its petition, filed in the U.S. Bankruptcy Court for the District of Delaware. Its largest unsecured creditors include US Food, owed $1.68 million; Lion Point Capital, owed $675,000; and Sysco Corp., owed $390,639.
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