A popular burger chain is facing the culmination of a difficult year of economic failures, and could be standing on the edge of bankruptcy – and the end of the business entirely.
Hemorrhaging Cash
BurgerFi, a popular fast-casual burger chain is currently hemorrhaging cash, and the company fears it may be forced to file for Chapter 11 bankruptcy in the near future.
Recent SEC Filing
The Florida-based burger chain, which also owns the pizza chain Anthony’s Coal Fired Pizza, had only $4.4 million in revenue as of August 14, according to a filing with the Securities and Exchange Commission.
Major Estimated Losses
What’s more, the company confirmed that it expects a loss of $18.4 million for the second quarter, compared to losses of $6 million reported for the same quarter last year. It has not yet reported its latest quarterly earnings.
Asking for Debt Relief
Now, BurgerFi is seeking extended relief from creditors – without it, the chain will need to secure funding from new lenders or sell off its assets. If all of these strategies fail, it may turn to a bankruptcy filing as a last resort.
Doubt Over It’s “Ability to Continue”
“Based on the Company’s liquidity position and currently as well as the Company’s current forecast of operating results and cash flows .. absent any other action, there is substantial doubt about the Company’s ability to continue to operate as a going concern,” the company’s SEC filing reads.
Potential to Seek Bankruptcy Filing
“If the Company does not receive adequate relief from its senior lender and additional sufficient liquidity from potential liquidity providers or from sales of the Company’s assets to meet its current obligations, it may seek protection under applicable bankruptcy laws.”
Emergency Funding Not Enough
On August 8 BurgerFi received $2.5 million in emergency funding from one lender, but even then the company said it was unlikely to cover its bills. If its senior creditor were to recall BurgerFi debts in full now, the chain would be put at risk of foreclosure.
A Predictable Turn
The chain has been on a predictable decline in recent years, following a trend for fast-casual restaurants, most of which are grappling with falling foot traffic.
22 Recent Restaurant Closures
Between January and March BurgerFi closed eight locations, following on from 14 closures last year. Most of these 22 restaurants were on the East Coast.
Still in Operation
Now, BurgerFi operates just 102 burger restaurants across the country and 60 Anthony’s Coal-Fired Pizza locations.
Not the Only Ones
Around the US consumers are becoming increasingly dissatisfied with fast food menu prices, which have soared due to and even beyond the inflation rate in recent years.
Giving Up on Fast Food
Former fast-food lovers are becoming more discerning about where they spend their money, and in many cases, are giving up the drive-throughs and meal deals altogether.
Major Chains Affected
With major chains like McDonald’s and Burger King reporting falling sales and fewer customers, it’s no surprise that smaller companies like BurgerFi have been pushed to the brink of bankruptcy, and beyond.
Several Factors Involved
While it has pointed out falling sales as part of the problem, BurgerFi also attributes its struggles to rising minimum wage rates in certain states, and the price of chicken wings, a staple fast-casual menu item that has seen costs soar in recent years.
Blamed on Bad Weather
The company recently defaulted on a loan in early April, with BurgerFi CEO Carl Bachmann attributing poor performance to bad weather around the chain’s key locations. In particular, coastal areas in the east and west.
Struggles on Struggles
Just a month later the company gave further indication that the chain was struggling, admitting to cashflow problems that would require “strategic alternatives.”
“Key Strategic Priorities”
“Looking ahead, we remain laser-focused on driving revenue growth while further enhancing operational efficiencies to increase profitability based upon the five key strategic priorities that we have implemented since last July,” Bachmann said at the time.
Laying the Foundations
“Achieving sales and margin improvements cannot happen overnight but we are laying a solid foundation upon which to build,” he continued.
Little Change in 3 Months
While there was no expectation of overnight success, circumstances seem to have worsened for the chain in the last 3 months.
What Happens Next?
With the most recent announcements of potential bankruptcy and ongoing prohibitive costs for inflation-weary customers, BurgerFi fans may see their favorite burger chain close its doors for good.
Featured Image Credit: Shutterstock / Billy F Blume Jr.
The content of this article is for informational purposes only and does not constitute or replace professional financial advice.
The images used are for illustrative purposes only and may not represent the actual people or places mentioned in the article.
