Burger King on the Brink: Fast Food Chain Facing Bankruptcy Amid Declining Sales
Burger King, one of the largest fast-food chains in the world, is currently facing a major financial crisis, with declining sales and mounting debt pushing the company toward the brink of bankruptcy. Despite being one of the biggest names in the industry, the company is not immune to the challenges that come with running a business in the modern world. Burger King, which had been the second-largest burger chain in the US for many years, lost its position to Wendy's in 2020.
For years, Burger King has been known for its signature flame-grilled burgers and Whopper sandwiches. The fast-food chain was founded in 1954 and has since grown to become a global brand, with over 18,000 restaurants in more than 100 countries. Recently, two of its franchisees which run over 140 locations, have gone bankrupt, adding to the company's troubles.
Per The Daily Mail, Meridian Restaurants Unlimited, a Burger King franchisee with 118 locations in the US, filed for bankruptcy last month due to $14 million in debt. As a result, they will be closing 27 restaurants across six states. Additionally, EYM King announced it is closing 26 restaurants in Michigan, and Toms King was sold out of bankruptcy for $33 million. If Burger King does not improve its financial situation, it could enter a "death spiral," warns one analyst.
The company has attempted to diversify its menu, introducing options like the Impossible Whopper, a plant-based alternative to its signature burger. Their admission that the same equipment used for beef and chicken would be used to cook it forced them into the mother of all climb-downs. Attempts such as the meat-free Impossible Burger and mental health awareness products were criticized for being mere gimmicks. The company's focus on limited-time offers instead of modernizing its menu and weak digital platform put it at a disadvantage.
The COVID-19 pandemic dealt a severe blow to the fast-food industry. Despite efforts to pivot towards online and delivery services, the fast-food chain has been unable to fully adapt to the changing landscape. In September 2020, RBI announced it would invest $400 million to improve its brand and restaurants. They took the Whopper off the value menu and added new flavors.
In April 2021, RBI hired Tom Curtis to improve their business in the US. Curtis noticed that some workers were putting cheese in the wrong place, which slowed down production. He wanted to make the process more consistent. He also thought the Ch'King sandwich was too complicated for workers. They replaced the Ch'King sandwich with a new line of chicken sandwiches that were easier to make. The changes led to a 5% increase in sales and a 40% increase in customer satisfaction. Curtis and the new CEO of RBI, Josh Kobza, are optimistic about the company's future. The company's performance has been solid, but some analysts believe it still lags behind its rivals.
C Squared partner Carty Davis, from C Squared Advisors, an independent investment bank with a focus on restaurant and franchise industries, says, "The biggest issue for Burger King was they didn't have the increase in profitability that most others did in the early stages of the pandemic. But their recent performances have been solid. We're cautiously optimistic that the worst is over and they will start to see improvements in performances. Burger King has been through ups and downs numerous times since they've been in this industry — frankly, the brand has always bounced back." Others seem to be less convinced. Sean Dunlop, an equity analyst at the rating agency Morningstar, says the chain is still in "a really tough position."
