Two popular restaurant chains consider bankruptcy, liquidation
Both companies share the same corporate owner which is pursuing strategic alternatives which could include those options, a sale, or a strategic partnership.
The restaurant industry changed because of the Covid pandemic and many chains continue to struggle as prices have increased, and while employment is at an all-time high, many people are worried about keeping their jobs.
Consumers have experienced sticker shock at times in restaurants and many Americans have gotten pickier about when they eat out. In addition, since many companies continue to operate remotely or operate on a hybrid schedule, eateries that once had great locations, now struggle to find customers.
Related: Key grocery chain brand files Chapter 11 bankruptcy
A restaurant located near an office complex that welcomes a lot fewer people each day can have amazing food and it will still struggle. And, of course, it's not easy to pack up your restaurant and move it where the people are. Even if you could, people working from home are less likely to eat out.
It's a situation that has hurt a lot of chains that were already struggling with Covid-related debt at high interest rates, higher labor costs, and rising food prices. That has forced many chains to close locations or to shutter altogether.
Red Lobster, for example, has closed roughly 50 restaurants and has filed for Chapter 11 bankruptcy protection. The owner of Boston Market has been legally prevented from a formal bankruptcy filing, but the chain has a mountain of debt and only a handful of remaining locations.
Now, a publicly traded restaurant company that has two well-known brands has shared that it's taking steps to address its financial position. Image source: Vlad Teodor/Shutterstock
BurgerFi also owns Anthony's Coal Fired Pizza
There was a period when it appeared that fast-casual chains would put casual sit-down chains out of business. Not offering waiter service saves a company money, but these companies — with Chipotle as the lead example — generally offer food that's higher quality than traditional fast food.
The problem is that while consumers have generally been willing to pay a premium over fast-food chains that serve similar menus, more people are trading down. In many ways its like how Walmart has reported an increase in customers who make a six-figure income.
People may have the money, but their wary to spend it because even in a strong economy, shifting needs have left many people at risk of layoffs.
BurgerFi International (BFI) runs two brands Anthony's Coal Fired Pizza & Wings and its namesake burger chain. The company markets BurgerFi as being a superior product to traditional fast food (without directly calling out any competitors.
"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 chain shared on its website.
The company uses similar language to describe its pizza chain.
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"Fresh ingredients are at the core of our menu, coal fired flavor is at the heart of who are. We use only the highest quality ingredients, including hand-picked Italian tomatoes for our sauce, vine-ripened plum tomatoes for our salads, Pecorino Romano grated in-house, fresh vegetables and herbs, and homemade dough," the company posted on the Anthony's Coal Fired website.
The problem, or at least one of them, is that better ingredients are expensive.
BurgerFi is reviewing its strategic alternatives
"BurgerFi International, Inc. owner of the high-quality, casual dining pizza brand under the name Anthony’s Coal Fired Pizza & Wings (“Anthony’s”) and one of the nation’s leading fast-casual 'better burger' dining concepts through the BurgerFi brand, announced today several key initiatives with the goal of enhancing the company’s prospects and ensuring stable Management as the Company goes through the process of reviewing strategic alternatives," the company shared in a press release.
The company's board of directors has hired Kroll Securities, as its exclusive financial advisor to support an ongoing evaluation of strategic alternatives. BurgerFi made it clear that the end result of the review may not be positive.
"There can be no assurance, however, that the strategic review process will result in an outcome favorable to the company or its stakeholders," BurgerFi shared.
The company, which defaulted on its credit facility in April. TREW Capital Management Private Credit has agreed to a forbearance period until at least July 31. In addition, L Catterton and TREW have agreed to each lend BurgerFi $2 million during this strategic review process.
Anthony's currently has 60 locations with the company owning 59 of them, while a franchisee runs the remaining restaurant. BurgerFi has 102 locations, 75 franchised and 27 corporate-owned.
The company acknowledged that it has filed documents with the SEC that acknowledge that there are situations where the company could not be able to survive. Those include "our ability to continue to access liquidity, to pursue and enter into a strategic transaction or seek a strategic transaction while in bankruptcy protections, to maintain our listing on the Nasdaq Stock Exchange, and to continue as a going concern."
That's legally required perfunctory language, but the company did receive a delisting notification from NASDAQ in January with about $4 million in cash and $5 million in accounts payable.
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