Fast-food franchise closes restaurants after Chapter 11 bankruptcy
Competition in the fast-food sector has intensified as operators navigate a landscape marked by inflation, economic uncertainty, and a recent decline in the cost of home-cooked meals. Many chains are grappling with increasing labor costs and the aftermath of heightened debt levels incurred during the COVID-19 pandemic, creating a perfect storm of challenges.
The Impact on Restaurant Brands International
Restaurant Brands International (RBI), the parent company of well-known chains like Burger King and Popeyes, has faced significant adversity. In 2023, three major Burger King franchise operators filed for bankruptcy, leading to hundreds of store closures. The chain also witnessed multiple Popeyes franchisees entering bankruptcy, resulting in numerous location shutdowns. In response to these challenges, RBI stepped in to acquire one of its key franchisees.
According to RBI’s recent release, “Carrols is the largest Burger King franchisee in the United States today, operating 1,022 Burger King restaurants in 23 states that generated approximately $1.8 billion of system sales during the 12 months ended Sept. 30, 2023.” Carrols also manages 60 Popeyes restaurants across six states. This strategic acquisition followed the bankruptcy filings of two large franchisees, Premier Kings and Meridian, whose multiple locations went unsold during auction after Chapter 11 proceedings. RBI chose to purchase select locations while allowing others to close.
Bojangles Faces Financial Troubles
While not as prominent as Burger King or Popeyes, Bojangles is a beloved chain with over 800 restaurants across eight states, specializing in Southern-style chicken, biscuits, and tea. The company utilizes a franchise model, which ties its success to the financial health of its operators. Recently, Bojangles experienced closures of all its Maryland locations due to the financial difficulties faced by one of its franchisees.
Unlike RBI, Bojangles is a private entity, having been taken private by Durational Capital Management LP and Jordan Co. in 2018. This lack of public disclosure makes it challenging to assess whether the overall brand’s performance has contributed to the closure of its five Maryland locations after a Chapter 11 bankruptcy filing.
Complications in Bankruptcy
The Maryland closures, operated by franchisees Salim Kakakhail and Yavir Akbar Durranni, have not been without complications. According to local news outlet WUSA9, the partners, who operated under several LLCs including ABS Network, are currently facing a state investigation related to allegations of wage theft and fraudulent W-2s. In November, Durranni and ABS Network filed for bankruptcy in New Jersey.
Reports indicate that the former owners owe money to former employees and have accrued over $69,000 in back property taxes. Some former employees even claimed that the restaurant would frequently purchase fried chicken from competitors like Popeyes and Safeway when supplies ran low.
In response to the situation, Bojangles issued a statement clarifying that “the franchisee is no longer in the Bojangles system.” The company emphasized that franchisees are independent business owners with autonomy over their operations, including employee hiring and payroll management.
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