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Epic Economist, 11/10/23
"15 Biggest Restaurant Chain Bankruptcies of 2023"
"Economic instability, labor pressure, and changing consumer habits are just a few of the challenges faced by U.S. restaurant chains this year. Many beloved companies struggled with rising borrowing costs and intense competition for customers, which led to some shocking bankruptcies throughout the year. In this video, we remember the biggest bankruptcies of 2023, as well as the latest filings sending shockwaves across the market right now.
One major example is Burger King. In the first half of 2023, two large operators, and a small franchisee filed for Chapter 11 protection citing rising debt and declining revenues. Meridian Restaurants, Toms King, and Restaurant Brand International also conducted store closings as a part of their restructuring plan. So far this year, more than 400 Burger King restaurants have been shut down, and even more are likely to stop operating in the next few months. That’s because eleven days ago, another big franchisee operator has gone bankrupt. Premier Kings, which managed stores in Alabama, Georgia, Tennesse, South Carolina, and Florida, also sought court protection in an attempt to save some of its 172 Burger King units. The company reported a $32 million drop in sales and a net operating loss of $27 million. More details about the proceedings are going to be shared in December, but lenders believe about one-third of the Premier King locations will eventually cease operations due to underperformance.
Likewise, one of the biggest Carl’s Jr. operators, Summit Restaurant Holdings (SRH), went under earlier this year, and closed dozens of restaurants across the country. The group’s decision to file for bankruptcy is said to be due to a sharp decline in revenue and customer traffic, which added to rental obligations, debt, and other liabilities, making multiple stores unprofitable. In its filing, the company also noted that the decision was also driven by higher wages, labor costs, lower staff availability, shipping, and food inflation as well as general inflation, QSR Magazine reported.
Carl’s Jr. sister chain Hardee’s was also operated by SRH, and the group’s bankruptcy caused the fast food chain to close 39 restaurants so far this year. About 145 Hardee’s locations are expected to be sold to a “qualified and well-capitalized buyer, with a record of success across the restaurant, entertainment, food, beverage and retail markets,” according to its parent company. But since the announcement was made in May, a deal hasn’t been settled. Industry experts say the chain isn’t considered a good investment right now. During the latest fiscal year, Hardee’s sales declined by 4.2%, and average unit volumes dropped by 3%. It continued to struggle throughout 2023 while competitors reported record profits.
Experts say many other companies are just hanging by a thread, and a much bigger wave of distress companies is about to hit the market in 2024. It’s getting increasingly harder to survive in such a tight economic environment. Businesses are fighting over customers as more Americans continue to cut their spending on restaurants. Restaurant chains now have to prove their product is unique, and that their brand has what it takes to become a great success. Unfortunately, this means it’s time for many struggling companies to go. We never know for sure who will go down next, but there are many consumer favorites in dire financial straits right now. In 2024, conditions will be even more difficult, and more bankruptcies will certainly serve as a shock for the entire market."
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