Harold’s Chicken, the famous American fast-food chain serving fried chicken and which has more than 45 locations in the Chicago area, has announced that it will be filing for Chapter 11 bankruptcy protection, much to the surprise of many. The restaurant business which has been located in Chicago for over 70 years and has a solid reputation because of its ties to the Patrick Curtis family and the African American populace is presently undergoing a reorganization process to address its creditors. However, here are the implications of this on Harold’s Chicken and the reason they filed for chapter 11 bankruptcy.
Why did Harold’s Chicken file for bankruptcy?
The Nevada franchise owner of Harold’s Chicken has recently sought bankruptcy protection under Chapter 11. The company reported liabilities averaging $40,000, with zero cash or other assets. While the filing did not go into details about the news, the restaurant space has experienced similar unsettling developments in the past, such as growing overhead costs, escalating inflation, and labor cost increases, which may have affected the company to a certain degree.
In recent years, fast-food chains have felt serious stress. The COVID-19, and the present inflation peaks, along with the shift in customers’ taste have created a negative strain to many restaurant owners, Harold’s included, and it appears to have been overwhelming for them and the so-called re-organization is the only option the company has resorted to.
What is Chapter 11 Bankruptcy?
When a company files for Chapter 11 bankruptcy, it seeks to reorganize its debts instead of liquidating. This means Harold’s Chicken is not closing its doors just yet. The business will attempt to restructure its financial obligations while continuing operations. This gives them an opportunity to stabilize and, potentially, recover. However, there are no guarantees in such situations, and the path ahead can be challenging.
How does this impact Harold’s Chicken Locations?
The action taken affects Harold’s Chicken outlets in Nevada although the restaurant has branches in as many as 8 states of America including its vigorous presence in Chicago. Harold’s has a vast network of 46 branches across the country out of which 13 are situated in Chicago. It is unclear whether this bankruptcy filing will affect other franchise outlets, but one thing is apparent, it will not be easy for the branches in Nevada.
However, some challenges that Harold’s Chicken franchises have had to face, is not completely new. In the last couple of years, a number of outlets have had to be closed. In mid-2024, for instance, the Illinois Department of Revenue ordered the closing down of one of the Chicago locations because of unpaid taxes. Yet, another location closed in 2020 when the franchise owner battled with the landlord following unpaid rents.
The legacy of Harold’s Chicken
Harold’s Chicken is more than just a fast-food joint, it is a cultural institution. Founded in 1950 by Harold Pierce, it became one of the few Black-owned fast-food chains in the country. The chain thrived by catering to African-American neighborhoods, offering affordable, flavorful fried chicken.
Over the years, Harold’s gained national recognition, building a loyal customer base in Chicago and expanding across the country. But even iconic businesses aren’t immune to financial strain, as we now see with this Chapter 11 filing.
Will Harold’s Chicken survive?
The future for Harold’s Chicken is still unclear. Chapter 11 bankruptcy allows the firm to take a step back and reorganize, however, the circumstances, this time is a bit difficult. If the debts can be managed, the company can carry on with its operations. Nevertheless, a lot relies on how they will handle their cash flow in the next few months, and if they will be able to cope with the dynamics of the fast food business today.
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