Popular fast-food chain facing bankruptcy, takeover

Some restaurant chains were not ready for the pivot to takeout and delivery forced by the Covid pandemic. In many cases, eateries lacked the needed digital infrastructure to make those changes quickly. That left them using patchwork solutions while companies like Domino's, McDonald's, and Starbucks ...

Jun 12, 2024 - 02:30

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Popular fast-food chain facing bankruptcy, takeover

Some restaurant chains were not ready for the pivot to takeout and delivery forced by the Covid pandemic. In many cases, eateries lacked the needed digital infrastructure to make those changes quickly.

That left them using patchwork solutions while companies like Domino's, McDonald's, and Starbucks were perfectly set up to close their dining rooms. It's not that those companies planned for a pandemic — none likely saw that as a contingency worth planning for — but digital and takeout were built as huge parts of their brand.

In addition, some restaurant chains found themselves owning a portfolio of eateries that was no longer where their customers were. Many companies built out locations designed to serve office workers having lunch.

When offices closed, that became a failed model. There were no customers to sell to in many downtown areas and those restaurants were not well located for pickup or delivery.

Even when offices reopened, many companies went to hybrid schedules or let some workers stay home. That created a situation where some companies had a large number of locations that no longer had a customer base.

It was a disaster that has forced a number of chains to close locations, or even file for bankruptcy. One struggling fast-food burger chain, and its sister restaurant, a sit-down pizza chain, have been suffering since the Covid pandemic and the situation has become dire.

BurgerFi marketed itself as offering a better burger than traditional fast food.
Image source: Vlad Teodor/Shutterstock

BurgerFi and Anthony's Coal-Fired Pizza pursue 'strategic alternatives'

BurgerFi has been one of a handful of fast-food chains, along with Five Guys and Shake Shack, to build a business model around offering a better hamburger. The company, which also owns the Anthony's Coal-Fired Pizza chain, has not been shy about touting its product.

"We don’t just serve great burgers. Since 2011, we’ve been serving next-level burgers made with fresh ingredients from the top suppliers across the country with an uncompromising standard for flavor and quality in everything we do," the company shared on its website.

It's fair to say that model largely worked until the Covid pandemic when the company hit a downward spiral it could not reverse. That led to a recent admission that it was hiring an outside firm to consider its strategic alternatives and shared that the end result may not be positive.

"The board of directors of BurgerFi has formed a special committee of Directors and retained Kroll Securities, LLC as its exclusive financial advisor to support an ongoing evaluation of strategic alternatives," the company shared in a press release. "...There can be no assurance, however, that the strategic review process will result in an outcome favorable to the company or its stakeholders."

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BurgerFi's lender could end up owning the chain

As part of the review process, BurgerFi has reached a forbearance agreement with its existing lender, Trew Capital Management until at least July 31. In addition, both Trew and L Catterton have loaned the company $2 million each.

Trew has purchased and operates a number of well-known restaurant brands including the Famous Dave's barbecue chain.

More bankruptcy:

The company's founder Jeff Crivello has made it clear that Trew could end up operating BurgerFi and Anthony's Coal-Fired Pizza in a debt-for-equity deal if the company defaults on its loans.

Civello made it clear that he wasn't rooting for any particular outcome.

"I’m the lender to the business,” he told Restaurant Business Online. “Only if they are unable to repay the loan will we operate it. BurgerFi and Anthony’s are great brands and we have a high level of confidence that they will thrive in the future.”

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He made it clear that he would be happy with either outcome.

"We bought the debt with an agnostic view. If they pay us back with interest, as the lender we are happy, if not we are capable and willing to own it,” he added.

BurgerFi, under its two brands, operated 162 restaurants. That included 27 corporate-owned and 75 franchised BurgerFi locations. All but one of the 60 Anthony’s Coal-Fired Pizza locations are corporate-owned.