The popular burger chain is facing possible Chapter 11 bankruptcy

Owning a major franchise of fast food chains like Burger King, Wendy’s, Hardee’s or Popeyes was at one time like owning a license to print money.

But times have changed as a number of economic factors in recent years, such as the effects of the Covid pandemic, high inflation, rising interest rates and rising minimum wage rates, have pushed some of these fast food chain operators into bankruptcy.

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In 2023, Burger King operators Meridian Restaurants and Toms King filed for Chapter 11, blaming high costs and slow sales. Hardee’s restaurant operator Summit Restaurant Holdings, with 106 units, also filed for bankruptcy and either closed or sold its restaurants.

Wendy’s franchisee Starboard Group, which operated 72 locations, also filed for Chapter 11 in 2023, and RRG Inc., an operator of 17 Popeyes locations in Georgia, in January filed for Chapter 11 bankruptcy .

Rarely is a fast-food franchisor forced into bankruptcy, but that rarity could soon happen as the owner of the fast-casual burger chain is struggling BurgerFi International (BFI) is at risk of filing for Chapter 11 bankruptcy after defaulting on senior secured debt owed to TREW Capital Management.

The Fort Lauderdale, Fla.-based restaurant company, founded in 2011, operates 102 franchised and corporate-owned BurgerFi locations that sell burgers, hot dogs, crispy chicken, hand-cut fries, ice cream, beer, wine and soft drinks.

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The company also operates 59 corporate-owned and one franchised Anthony’s Pizza and Wings restaurants.

On April 1, BurgerFi breached the minimum liquidity requirement for its $51.3 million term loan and $2 million revolving credit facility with lender TREW, both of which expire on September 30, 2025.

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Under the terms of the credit agreement, it implicitly entitles TREW to pay the debt earlier than the due date. The restaurant chain does not have the funds available to repay the loans if the lender calls on the debt, according to the debtor’s quarterly Securities and Exchange Commission Form 10-Q report for the period ending April 1, which was filed May 16.

BurgerFi and the lender later entered into a forbearance agreement on May 30 that allowed the company to access the $2 million remaining on the revolving credit line, according to an SEC Form 8-K filing.

The company has been reviewing strategic alternatives, according to a May 30 statement, seeking additional financing, seeking to sell some or all of its assets or the entire company. It also manages its cash flows by prioritizing certain obligations over others.

A burger, fries and chicken from BurgerFi are displayed on August 20, 2024 in Arlington, Va. (Photo Illustration by Tierney L. Cross/Getty Images)

Tierney L. Cross/Getty Images

BurgerFi will report a quarterly loss

BurgerFi reported on Aug. 16 that it was unable to file its quarterly SEC Form 10-Q report. In an SEC filing, it said it expects to report a $1.8 million, or 4 percent, drop in sales for the quarter ended July 1 and a net loss of $18.4 million for the quarter , compared to a loss of $6 million in the same quarter in 2023.

The company expects to report a cash and cash equivalents balance of $4.4 million. Based on its liquidity and planned forecasts of operating results and cash flows, there is substantial doubt about the company’s ability to continue as a going concern.

The company said there is no assurance it will be able to restructure its obligations, obtain additional financing or sell assets to meet its obligations.

The forbearance agreement expired on July 31, but BurgerFi reached an early settlement agreement with TREW, offering the company $2.5 million and requiring the company to submit a letter of intent to sell the company by August 28 and an agreement to asset purchase for seven days. after receiving the letter of intent.

Closing of the asset purchase agreement should occur within 60 days, unless the debtor files for Chapter 11 bankruptcy. If BurgerFi files for bankruptcy, it would likely conduct a Section 363 bankruptcy sale .

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