The fast-casual dining landscape is facing a turbulent year. In another blow to the industry, popular burger chain BurgerFi has filed for Chapter 11 bankruptcy protection. This filing adds BurgerFi to a growing list of restaurant chains struggling to stay afloat amidst a challenging economic climate. Read on to discover the factors that led BurgerFi to file for bankruptcy and how the company intends to navigate its way out of this financial crisis.
BurgerFi Declares Bankruptcy, But Restaurants Remain Open
On September 11th, BurgerFi International, Inc., the parent company of the premium casual dining chain Anthony’s Coal Fired Pizza & Wings and the popular fast-casual “better burger” concept BurgerFi, announced it has filed for Chapter 11 bankruptcy protection following a period of financial difficulties.
Despite the filing, the company confirmed that all 144 BurgerFi and Anthony’s Coal Fired Pizza & Wings locations across the U.S. and internationally will continue to operate. This information was shared in a press release on Tuesday.
The bankruptcy petition, submitted to the U.S. Bankruptcy Court in Delaware, affects only the 67 corporate-owned locations. Franchise-operated sites are not included in the bankruptcy proceedings. Of the company’s holdings, it owns 17 of the 93 BurgerFi restaurants and 50 of the 51 Anthony’s locations.
Key Factors That Led to BurgerFi’s Bankruptcy Filing
The bankruptcy filing of BurgerFi International comes as no surprise, given the company’s earlier warnings about its financial instability. In August, the company disclosed that it was running low on cash and might need to seek bankruptcy protection. As of August 14th, BurgerFi reported holding only $4.4 million in available funds.
As noted in an August 16th Securities and Exchange Commission filing obtained by USA Today, this financial strain was partly caused by the 4% decline in sales at the company’s BurgerFi and Anthony’s locations during the three-month period ending July 1st, 2024, which translated to a drop of approximately $1.8 million compared to the previous year. That same August filing indicated a significant concern about its ability to continue as a going concern without additional intervention, potentially leading to a bankruptcy filing.
Nation’s Restaurant News reported that BurgerFi International’s financial woes have been exacerbated by its acquisition of Anthony’s Coal Fired Pizza in October 2021. Following this acquisition, sales did not experience the anticipated growth; instead, they stagnated and have been on a decline since reaching their peak in 2021.
BurgerFi’s Turnaround Efforts Fall Short
In response to the abovementioned financial difficulties, BurgerFi’s Board appointed Carl Bachmann as CEO and Christopher E. Jones as CFO in July 2023. The new leadership was tasked with revitalizing the brands and addressing operational challenges. They quickly rolled out a strategic plan to tackle issues such as declining same-store sales, high employee turnover, and a stagnant menu. As part of these efforts, the company conducted a comprehensive review of its operations, which is still ongoing.
The evaluation led to the closure of 19 underperforming corporate-owned stores and a reduction in related operating costs, aligning the company’s footprint with current business standards. Despite these efforts, the company has estimated its assets to be between $50 million and $100 million, with debts ranging from $100 million to $500 million, according to the bankruptcy filing.
“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,” said Carl Bachmann in the press release announcing the company’s bankruptcy filing. He expressed gratitude to the company’s loyal customers, vendors, business partners, and dedicated team members, who remain integral to the company’s operations.
Jeremy Rosenthal, Chief Restructuring Officer of BurgerFi International, Inc., added, “BurgerFi and Anthony’s Coal Fired Pizza & Wings are dynamic and beloved brands. In the face of a drastic decline in post-pandemic consumer spending amidst sustained inflation and increasing food and labor costs, we need to stabilize the business in a structured process. We are confident that this process will allow us to protect and grow our brands, continue the operational turnaround started less than 12 months ago, and secure additional capital.”
Other Fast-Casual Restaurant Chains That Filed for Bankruptcy in 2024
In 2024, several fast-casual restaurant chains faced significant financial challenges, leading them to file for Chapter 11 bankruptcy protection. Aside from BurgerFi, notable chains that have sought bankruptcy protection include:
- Red Lobster: This iconic seafood chain filed for Chapter 11 bankruptcy in May 2024, citing mounting losses and declining customer traffic. The company has since closed approximately 100 locations and is now in the process of exiting bankruptcy. A consortium of investors is set to acquire Red Lobster, which expects to emerge from bankruptcy with around 544 locations remaining.
- Rubio’s Coastal Grill: Following a previous bankruptcy filing in 2020, Rubio’s has once again sought Chapter 11 protection in 2024, largely due to the implementation of a $20 minimum wage in California and ongoing financial pressures.
- Tijuana Flats: This Tex-Mex chain has also filed for bankruptcy, facing similar challenges as other fast-casual restaurants in the current economic climate.
- Sticky’s Finger Joint: Known for its chicken fingers, Sticky’s has entered bankruptcy proceedings as it attempts to restructure its operations amidst financial difficulties.
- Miracle Restaurant Group: This franchisee of Arby’s, operating 25 locations, filed for bankruptcy, citing inflationary pressures and negative same-store sales as key factors contributing to its financial woes.
- Buca di Beppo: Buca di Beppo filed for Chapter 11 bankruptcy in August, citing rising costs and labor issues. The company plans to restructure 44 of its “core” locations across 14 states and open one new restaurant while undergoing bankruptcy proceedings
The wave of bankruptcies in the fast-casual dining sector reflects the ongoing struggles many restaurant chains face in the wake of rising operational costs, declining consumer spending, and the lingering effects of the COVID-19 pandemic.