The quick-service restaurant industry is still trying to deal with the economic fallout brought about by COVID-19 at the tail end of almost five years since kicking into high gear. Many renowned chains and franchises have been through financial difficulties, so many went ahead and shut down operations last year.
For example, Popeyes franchisee RRG Inc., which has 17 outlets in Georgia, filed for Chapter 11 bankruptcy in February 2024 in the U.S. Bankruptcy Court for the Southern District of Georgia concerning three underperforming locations that, per the company’s claim, burdened it financially. Similarly, in June 2024, Miracle Restaurant Group, the Arby’s franchisee with 25 units in Illinois, Indiana, Texas, Mississippi, and Louisiana, applied for Chapter 11 status. Persisting impacts of the pandemic and cost uptick in products and labor due to rampant inflation were some of its major blames for financial woes.
Meanwhile, EYM, an area Pizza Hut franchisee with 140 locations located in the states of Texas, Wisconsin, and Ohio, filed for Chapter 11 in July 2024. The organization also stated that it did not have any capital on hand to meet franchise royalty payments owed to Yum Brands. BurgerFi International, which also operated 144 burger and pizza restaurants across the nation, joined the list of bankrupts after filing for Chapter 11 in September 2024, having failed to meet the expectations laid out in its turnaround plan.
Bankruptcy cases highlight indCloser to home, popular Arizona-based fast-food joint Eegee’s filed for Chapter 11 bankruptcy on Dec. 6, 2024, ustry-wide struggles
Borrowing on U.S. operations, this is not all. In December 2023, SouthRock Capital, a franchise operator of major fast-food chains with headquarters in São Paulo, Brazil, filed for bankruptcy following a default on a loan three months prior. The firm operated 1,600 Subway outlets, 187 Starbucks outlets, and numerous other franchises. The loan default ended the Starbucks and Subway franchise agreements, leaving the company more exposed to financial strain.
citing unparalleled hardships in the wake of the COVID-19 pandemic. According to the company’s CEO, Chris Westcott, market conditions have created economic pressures throughout the entire restaurant industry.
Five of its 30 locations closed down just before the company filed for bankruptcy, even though Eegee’s is widely recognized for its frozen fruit beverages, submarine sandwiches, and its original Teagee tea. It reduced significantly from a high of 35 in 2022 but still services 25 sites across Arizona.
This is when Eegee plans to streamline restructuring to fortify the company’s capabilities but maintain its quality and service levels.
Eegee’s economic constraints also resulted in customer backlash after switching from its traditional bread vendor to the new one in October 2022. The reactions resulted in the chain evaluating Capistrano’s brand this coming May 2024, after which the new vendor subscription will be activated sometime in August of the same year.
Industry outlook
Well, these bankruptcy filings may highlight the continuing struggle of the fast-food industry towards surviving the economic damage wreaked by the pandemic. Rising labor costs, inflation, and changes in consumer behavior created an environment where franchise operators all over the world can barely cope.
While some, like Eegee’s, are very optimistic about being able to restructure and come back better, others will find it an almost impossible case to run through the post-pandemic scenario. These coming years are crucial for these franchises as they will now try to settle operations and adjust to the new economic realities.
