December 3, 2023

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Bankrupt franchisee Burger King is offloading nearly 6 stores

Bankrupt franchisee Burger King is offloading nearly 6 stores

The beloved fast food chain that was once more expensive than competitors is now dealing with some major bankruptcy issues. Meridian closed its doors citing failure to recover from coronavirus-related complications in a post-coronavirus world characterized by higher wages, increased shipping and operating costs, food inflation, and reduced traffic, all exacerbated by national labor shortages. Cumulative cash flow problems left the franchisee deeply in debt. Before the auction, Meridian Restaurants Unlimited LLC owned only two brands: Burger King and Black Bear Diner. (This seems to be Black Bear Diner’s time to shine.)

In September 2022, Burger King announced a $400 million comeback plan called “Reclaim the Flame” — part of which will include closing 300 to 400 restaurants across America while axing underperforming franchisees. Similar performance issues will force Applebee’s to close an estimated 25 to 35 restaurants by the end of 2023.

This solution for Meridian units may be a headache for BK, but it is in line with the company’s previously announced geographic concentration strategy. Burger King’s business model relies on private franchisees to operate BK stores around the world. Now, BK plans to treat franchisees differently from now on, limiting the number of operators to 50 stores, all of which must be located in roughly the same area. Hopefully this tactic will prevent large franchisees from having to systematically dissolve in federal bankruptcy court (or at least prevent that from happening more often).