Struggling restaurant chain operator files Chapter 11 bankruptcy

Several economic issues, equivalent to rising inflation and high rates of interest, have resulted in restaurant franchisee financial distress, forcing several eatery operators to file for financial disaster in 2024.

Most operators will file Chapter 11 to restructure and reorganize, while reasonably some the franchisees with severe financial distress will make a choice Chapter 7 liquidation.

Related: Well known fast-food burger chain files for Chapter 11 financial disaster

In some cases, a debtor may possibly have in any other u . s . affiliations and can file for Chapter 15 for recognition of their case as a foreign proceeding to supply protection to its U.S. assets.

São Paulo, Brazil, restaurant chain operator SouthRock Capital, which operates eight TGI Fridays restaurant franchises in Brazil, on June 12 filed for Chapter 15 to supply protection to its rights to the TGI Fridays brand and another assets it has contained in the U.S.

The debtor had already been granted financial disaster protection in Brazil in December 2023 because it sought to restructure its business and continue operating.

As contained in the case of Chapter 7 or Chapter 11, filing Chapter 15 places an automatic stay on any legal actions against the debtor while the case proceeds.

SouthRock has operated hundreds of restaurants in Brazil, including about 1,600 Subway, 187 Starbucks and several other others. A loan default in September 2023 resulted in termination of its Starbucks (SBUX) agreement, and Subway also terminated its agreement with SouthRock in November 2023.

Popeyes franchisee RRG Inc., which operated 17 locations in Georgia, in February filed for Chapter 11 protection contained in the U.S. Financial ruin Court for the Southern District of Georgia blaming three underperforming locations for causing the company's distress.

Related: Iconic auto parts retailer files for Chapter 11 financial disaster

The debtor said it can continue to operate while in financial disaster and plans to barter its debt obligations in financial disaster to remain away from lease termination.

Other fast-food franchisees that filed Chapter 11 consist of EYM, which operates One hundred forty Pizza Hut locations in Texas, Wisconsin and Ohio. The Pizza Hut operator filed its petition in July, because it failed to have enough capital to pay its franchise royalties.

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Arby's franchisee Miracle Restaurant Group, which operates 25 units in Illinois, Indiana, Texas, Mississippi, and Louisiana, in June filed for Chapter 11 protection after the implications of the Covid-19 pandemic and inflationary pressures in commodity and labor expenses resulted in financial distress.

Dickey's franchisee files Chapter 11 financial disaster

Dickey's Barbecue Restaurants franchisee Smokin' Dutchman Holdings on Sept. 9 filed for Chapter 11 financial disaster contained in the U.S. Financial ruin Court for the Western District of Michigan in Grand Rapids to restructure its business, blaming its financial difficulties on Dickey's for allegedly imposing extreme and unreasonable demands on the debtor's resources.

The franchisee, which owns four restaurants in Holland, Jenison, Kalamazoo and Rockford, Mich, seeks the court's authority to reject its Dickey's franchise agreements to alleviate Smokin' Dutchman from the burden imposed upon it by the franchisor, per a declaration filed by the debtor's CEO Krage Fox.

The debtor will looking for court approval to make use of its cash collateral, accounts receivable, and inventory to fund its ongoing operations to cope with the going concern value of the debtor's assets. It said the company is most definitely now not ready to continue to operate and can lose going concern value if it really is now not ready to make use of its cash collateral.

The debtor opened his Kalamazoo location in 2018, purchased the Rockford and Jenison restaurants in 2020 and opened the Holland store in 2022.

The Kalamazoo-based debtor has about $2.1 million in debt, its declaration said.

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