Introduction
A 120-unit Burger King franchisee has recently filed for bankruptcy, making it the latest in a string of fast-food chains to do so in the past year. The franchisee, Carrols Restaurant Group, Inc., operates Burger King restaurants in 16 states across the United States. The filing comes as the restaurant industry continues to struggle with the economic fallout of the COVID-19 pandemic. The filing is a reminder of the challenges that the restaurant industry is facing and the need for continued support from the government and other stakeholders. This article will discuss the filing, the challenges facing the restaurant industry, and the potential implications for the future of the industry.
120-Unit Burger King Franchisee Files for Bankruptcy
A 120-unit Burger King franchisee has filed for bankruptcy, citing the economic impact of the coronavirus pandemic. The franchisee, Carrols Restaurant Group, Inc., is the largest Burger King franchisee in the United States.
Carrols Restaurant Group, Inc. filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York on Monday. The filing comes after the company was unable to reach an agreement with its lenders to restructure its debt.
In a statement, Carrols said it had been “adversely impacted by the COVID-19 pandemic, which has caused a significant decline in sales and customer traffic at its restaurants.” The company said it had been “unable to reach an agreement with its lenders to restructure its debt on terms acceptable to all parties.”
Carrols operates more than 800 Burger King restaurants in 17 states. The company said it plans to use the bankruptcy process to restructure its debt and “position itself for long-term success.”
The filing comes as the restaurant industry has been hit hard by the pandemic. Many restaurants have been forced to close their doors or reduce their hours due to the economic impact of the virus.
Carrols said it has secured $75 million in debtor-in-possession financing to help it through the bankruptcy process. The company said it expects to emerge from bankruptcy “in the near future.”
It’s no secret that many restaurant chains are struggling to pull in customers who are shying away from eating out because of soaring inflation. Chipotle, for example, recently admitted that lower income customers cut back on spending at the chain after it boosted its prices, while Domino’s also seems to be losing patrons due to its own price hikes.
This dropoff in sales and traffic has hit one Burger King franchisee based in Utah particularly hard. Meridian Restaurants Unlimited, which operates around 120 Burger King restaurants, filed for bankruptcy earlier this month, QSR Magazine reported. Meridian is now the second Burger King franchisee to file for bankruptcy since the start of the year, after TOMS King Holdings sought Chapter 11 bankruptcy protection in January, saying that it suffered from drops in foot traffic and revenue.
In court documents obtained by QSR, Meridian reported a drop in foot traffic at its restaurants over the last several years that has resulted in lower revenues. And while traffic declined, the franchisee didn’t see any relief or decreases in its rent, debt service, and liabilities. Additionally, the company struggled since its acquisition of the Burger King restaurants, which were underperforming from the start.
“These lower volumes result in smaller profit margins, and thus greater sensitivity to the recent dramatic rise in labor, commodity, and maintenance costs,” court documents said. “As a result, although certain of the restaurants are profitable, others operate at a loss, and have for many years, resulting in the Debtors’ inability to meet financial obligations timely.”
In light of the bankruptcy filing, it remains unclear what the future holds for Meridian’s Burger King locations, which are sprinkled across Utah, Montana, Wyoming, North Dakota, South Dakota, Minnesota, Nebraska, Kansas, and Arizona.
But Meridian believes it can improve its financial situation moving forward through measures like increased marketing, waste reduction, and restructuring some of its assets and obligations. The franchisee hopes these moves will “free up cash flow to support day to day operations and management objectives to become a healthy and thriving business,” the court documents said.
While only time will tell if Meridian can reverse its fortunes, the future looks promising for the Burger King brand. The chain reported promising increases in same-store sales, guest satisfaction, and franchisee profitability in the latest quarter.
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Zoe Strozewski