By: Victor Sahn, Esq.
On the heels of financial distress, Consolidated Burger Holdings LLC, along with two affiliates, has filed for Chapter 11 bankruptcy protection. This Burger King franchisee operates 57 restaurant locations across Florida and Georgia, including standalone stores and Walmart-based outlets. At its peak, the company managed 75 locations with 1,500 employees. Today, it employs 773 individuals, including 697 hourly and 76 salaried workers, with most positions at the restaurant level.
The filing underscores the challenging environment for franchisees in the fast-food sector, driven by a mix of macroeconomic conditions and internal pressures. For Consolidated Burger Holdings, the financial strain can be traced to several key factors:
- Declining Sales and Increasing Losses: From 2023 to 2024, the company experienced a sharp decline in revenue and an increase in operating losses, rising from $6.3 million to $12.5 million.
- Excessive Leverage: The 2018 acquisition of these 57 locations brought substantial secured and unsecured debt, totaling over $35.6 million. Defaults on rental agreements and obligations to Burger King Corporation further compounded financial challenges.
- COVID-19 Impact: The franchisee struggled to recover pre-COVID revenue levels, while operating expenses and debt service obligations remained constant.
- Litigation and Market Challenges: Pre-bankruptcy litigation with Burger King Corporation did not resolve favorably, and efforts to market and sell the business pre-bankruptcy failed to generate acceptable offers.
In this Chapter 11 proceeding, the primary objective is to sell the company as a going concern. While many of the 57 locations operate at a loss, the bankruptcy process offers an opportunity to reject unprofitable leases, potentially leaving a streamlined and more profitable operation in place. The company has retained its prepetition investment banker to continue marketing efforts and secured $1.7 million in additional funding from its prepetition lender to support operations during this process.
Given the challenges outlined, this case is likely to move swiftly toward a resolution. A sale or liquidation seems the most probable outcome. As Greenspoon Marder’s bankruptcy team monitors bankruptcy cases around the country, it serves as a reminder of the critical role of sound financial planning and proactive debt management for franchise operators in today’s competitive market.