Burger King Closing 400 Restaurants
Two major franchisees of the chain have declared bankruptcy this year.
Restaurant Brands International (RBI) is planning to close up to 400 Burger King restaurants this year in an effort to cull underperforming assets from the fast-food chain.
“We’ll work with them to leave the system and move on to do something else. There is simply no room for franchisees who are not willing or able to work hard to operate restaurants that are better than the system average over the long term,” Patrick Doyle, RBI chairman, declared in a Q1 earnings call.
Since the beginning of the year, two major Burger King franchisees have filed for bankruptcy, each citing weak store traffic and higher operating costs.
In March, Meridian Restaurants Unlimited, which operates 118 Burger King outlets, filed for Chapter 11 protection. The Utah-based company, which operates BKs in Utah, Montana, Wyoming, Minnesota, Nebraska, Kansas, Arizona, North and South Dakota.
Meridian said in a court filing that it acquired locations with lower-than-average sales, believing it could improve its results. Meridian’s unit volumes are lower than average for the Burger King system, which averages $1.4M per location, about $500K lower than Wendy’s and about half of what the average McDonald’s generates, Restaurant Business reported.
Meridian said in its filing that wages at its Burger King restaurants have increased 33% and food costs have increased 22% during the past two years “without proportionate decreases in rental obligations, debt service and other liabilities.”
In January, TOMS King, which has 90 Burger King franchises, filed for bankruptcy. RBI bought 17 of TOMs King’s BK locations after the bankruptcy filing, intending to sell them to stronger operators.
As of the end of the first quarter, Burger King had nearly 19,000 restaurants globally, with 6,960 of the flame-broiled burger joints in the US.
In the past year, RBI—which also owns fast-food chains Popeye’s, Firehouse Subs and Canada-based donut and coffee chain Tim Horton’s—has focused on expanding the Burger King brand internationally: the company added 589 international outlets while the number of BKs in the US dropped by 124.
Earlier this year, Burger King announced a $400M revitalization initiative—they’re calling it “Reclaim the Flame”—that provides assistance to remodel older franchises as well as expanded marketing.
RBI reported that average-per-store earnings before interest, taxes, depreciation and amortization (EBITDA) dropped to $140K per location in 2022, down 22% since 2018.