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BurgerFi International (NASDAQ:BFI), the parent company of Anthony’s Coal Fired Pizza & Wings and its own namesake burger chain, has become the latest casualty in the restaurant sector, filing for Chapter 11 bankruptcy protection. The Fort Lauderdale-based company’s 67 corporate-owned locations sought refuge from creditors in the U.S. Bankruptcy Court in Wilmington, Delaware, reporting assets of at least $50 million and liabilities exceeding $100 million.
A New Addition to a Growing List of Bankruptcies
BurgerFi joins a growing list of restaurant chains that have sought bankruptcy protection this year. Among its peers are Red Lobster, the largest seafood chain in the U.S.; Buca di Beppo, an Italian restaurant chain; Roti, a Mediterranean fast-casual restaurant; and Rubio’s Restaurants, the operator of Rubio’s Coastal Grill. This trend highlights the broader struggles faced by the restaurant industry amid changing consumer behaviors and economic pressures.
Financial Strain and Declining Stock Value
On the day of the filing, BurgerFi’s shares were trading at around 15 cents, marking an 18% drop as investors reacted to the news. Jeremy Rosenthal, the company’s chief restructuring officer, attributed the bankruptcy filing to a “drastic decline in post-pandemic consumer spending” coupled with persistent inflation and rising costs for food and labor.
BurgerFi’s financial troubles have been mounting for some time. A recent securities filing revealed a downturn in sales, even at established locations. The company reported expectations of significantly larger losses, driven by escalating wages and the cost of chicken wings. Additionally, it had defaulted on its debt and faced the possibility of bankruptcy if a resolution with lenders could not be reached.
Operational Challenges and Market Conditions
In a May earnings call, CEO Carl Bachmann acknowledged a “difficult start” to the year. He noted that the company faced revenue and profitability declines due to a challenging consumer environment and unfavorable weather conditions in key markets. BurgerFi anticipated an $18.4 million loss for the quarter ending July 1, compared to a $6 million loss in the same quarter the previous year.
Earlier this year, BurgerFi entered into a forbearance agreement with its restaurant lender, Trew Capital Management. As of April, the company’s liabilities stood at $200 million. Despite these financial strains, BurgerFi operates a total of 144 locations, with approximately half owned by franchisees and thus not affected by the bankruptcy. The chain had 162 restaurants just a month prior to the filing.
New Concepts and Ongoing Operations
In an effort to innovate and attract customers, BurgerFi recently launched its “Better Burger Lab” concept at its New York flagship. This public test kitchen aims to develop new menu items, including a potential fried chicken sandwich, to enhance the brand’s appeal.
The company’s bankruptcy proceedings are being handled by law firm Raines Feldman Littrell and restructuring advisor Force 10 Partners. The cases have been consolidated under case number 24-12017 and are assigned to Judge Craig Goldblatt.
