BurgerFi Files for Chapter 11 Bankruptcy: 10th for 2024

The restaurant industry continues to face unprecedented challenges in 2024, with multiple big-name chains filing for bankruptcy. One of the latest to join the list is BurgerFi International, a fast-casual burger chain that recently filed for Chapter 11 bankruptcy protection. The company’s struggles stem from declining sales, rising operational costs, and an ongoing post-pandemic environment where consumer spending has sharply decreased. In this blog post, we’ll explore the details behind BurgerFi’s bankruptcy, its impact on the broader restaurant industry, and what this means for the future of restaurant chains in 2024.

Introduction to BurgerFi’s Bankruptcy Filing

On September 11, 2024, BurgerFi International officially filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware. The decision to file came after a prolonged period of financial struggles, marked by a steady decline in sales and escalating costs for both the BurgerFi chain and its casual dining sibling, Anthony’s Coal Fired Pizza & Wings. According to an SEC filing on August 16, sales at both chains fell by 4% during the three-month period ending on July 1, 2024. This drop equated to a year-over-year loss of approximately $1.8 million.

While the company reported assets between $50 million to $75 million, its debt soared to a staggering $500 million, necessitating the move to restructure under bankruptcy protection. This is part of a broader trend within the restaurant industry in 2024, as many chains are filing for bankruptcy in response to declining foot traffic, rising food costs, high labor expenses, and increased interest rates.

Financial Troubles Leading to Chapter 11 Bankruptcy for Burgerfi

BurgerFi’s journey to bankruptcy has been marked by a series of financial challenges that began long before 2024. For the quarter ending on April 1, 2024, BurgerFi International reported revenue of $42.9 million, but the company also faced a net loss of $6.5 million. Perhaps most concerning was the sharp decline in same-store sales, which fell by 13% across BurgerFi’s outlets. The company’s overall financial health was further complicated by its acquisition of Anthony’s Coal Fired Pizza & Wings in 2021, a move intended to diversify its portfolio but one that added to its financial burden.

Key Stats:

• $50 million to $75 million in assets
• $500 million in debt
• $42.9 million in revenue for Q1 2024
• 13% drop in same-store sales
• 4% drop in quarter-to-quarter sales

The Acquisition of Anthony’s Coal Fired Pizza & Wings

In 2021, BurgerFi International made headlines with its $156.6 million acquisition of Anthony’s Coal Fired Pizza & Wings, a move intended to diversify its restaurant portfolio. The acquisition added 50 corporate-owned Anthony’s locations to its portfolio, along with 17 corporate-owned BurgerFi outlets and numerous franchised stores. However, the acquisition proved to be a double-edged sword.

While Anthony’s initially added to the company’s revenue, the ongoing economic challenges faced by the restaurant industry—coupled with rising operational costs—soon began to eat into the profitability of both brands. The decision to acquire Anthony’s added significant debt to BurgerFi’s balance sheet, contributing to the company’s eventual bankruptcy filing.

Impact on Franchise-Owned vs. Corporate-Owned Locations

One of the most notable aspects of BurgerFi’s bankruptcy filing is that it applies exclusively to the corporate-owned locations—67 in total—while the franchised locations are excluded from the proceedings. This distinction is critical for understanding the broader impact of the bankruptcy on both consumers and franchisees.

With 144 total locations across both brands, the majority of which are franchised, the filing is structured to protect the franchisees, who operate independently. According to BurgerFi’s statement, all locations—both corporate-owned and franchised—will remain operational during the restructuring process. This move aims to prevent widespread closures and maintain brand stability during the bankruptcy proceedings.

Future Outcomes of Burgerfi Bankruptcy

• corporate-owned restaurant bankruptcy
• franchise restaurant bankruptcy protection
• impact of bankruptcy on Burgerfi franchisees

Key Factors Contributing to the Burgerfi Bankruptcy

Several key factors contributed to BurgerFi’s decision to file for Chapter 11 protection. These factors reflect broader trends affecting the restaurant industry in 2024 and include:

1. Rising Food and Labor Costs: Inflation and supply chain disruptions have driven up the cost of ingredients and labor, cutting into profit margins.
2. Declining Consumer Spending: Post-pandemic consumer behavior has shifted, with fewer people dining out and increased competition from fast-casual and delivery services.
3. High Interest Rates: The rising cost of capital has made it difficult for companies like BurgerFi to service their debt.
4. Increased Competition: The fast-casual burger space is highly competitive, with major players like Shake Shack and Five Guys continuing to capture market share.
5. Underperforming Stores: In response to these challenges, BurgerFi closed 19 underperforming stores earlier in the year in an attempt to stabilize its operations.

The Broader Picture: Other Restaurant Bankruptcies in 2024

BurgerFi’s bankruptcy is far from an isolated incident. As of September 2024, at least 10 restaurant chains have filed for bankruptcy, according to CNBC. Other notable names include Red Lobster and Tijuana Flats, as well as several multi-unit franchisee groups operating under brands like Pizza Hut, Arby’s, and Subway.

This wave of bankruptcies is indicative of broader systemic issues within the restaurant industry, from rising operational costs to changes in consumer behavior. Franchise operators, in particular, are feeling the pinch, as many are locked into contracts that require them to adhere to specific operational standards even as their revenue declines.

Industry-Wide Challenges: High Costs and Declining Consumer Spending

The restaurant industry is currently facing a perfect storm of challenges. The combination of high food costs, labor shortages, and declining consumer spending has created an environment where profitability is increasingly difficult to achieve. Inflation has driven up the cost of ingredients, while many restaurants are struggling to find and retain staff, which in turn drives up labor costs.

Consumer behavior has also shifted in the aftermath of the pandemic. Many customers are opting for delivery or takeout over dining in, which has hurt many traditional restaurant chains. Additionally, rising interest rates have made it more expensive for businesses to borrow money, further complicating efforts to weather the storm.

Reasons for Burgerfi Bankruptcy

• inflation impact on restaurants
• labor shortages in the restaurant industry
• high input and food cost
• delivery and takeout trends 2024
• consumer behavior post-pandemic

Strategic Moves to Stabilize BurgerFi and Anthony’s and come out of Bankruptcy

Despite the challenges, BurgerFi International has implemented several strategic moves in an effort to stabilize its business and come out of bankruptcy. These efforts include:

1. Leadership Changes: In the past year, BurgerFi has appointed new leadership, including Carl Bachmann, the former president of Smashburger, as CEO, and Christopher Jones as CFO.
2. Store Closures: The company closed 19 underperforming corporate-owned stores in 2024 as part of its restructuring plan.
3. Operational Turnaround: The company has emphasized its ongoing operational turnaround, which began less than a year ago, and is focused on stabilizing its finances and securing additional capital.

What’s Next for BurgerFi?

As BurgerFi International navigates its Chapter 11 bankruptcy, the company will focus on stabilizing its operations, securing new financing, and continuing to serve its loyal customer base. While the road ahead is uncertain, BurgerFi’s decision to file for bankruptcy may allow it the breathing room it needs to restructure its finances and emerge stronger. For now, all locations will remain operational, ensuring that both BurgerFi and Anthony’s Coal Fired Pizza & Wings can continue serving their customers while the company works through its financial challenges.