A Third Major Burger King Franchisee Declares Bankruptcy

By Jonathan Maze of Restaurant Business Online,

Premier Kings, a 172-unit Burger King franchisee whose owner died in 2022, declared bankruptcy protection, saying that operating losses even after the company closed restaurants forced the issue.

It’s the third time this year that a major Burger King operator has taken such a step, while several others closed restaurants around the country in the aftermath of the chain’s sales and profit challenges.

In this case, Premier Kings’ Chapter 11 filing follows the untimely death of its owner, Patrick Sidhu, whose Popeyes stores were placed into bankruptcy earlier this year for the same reason.

The company put the restaurants up for sale and hired the investment banker Raymond James & Associates to market the restaurants. The company closed several restaurants to “avoid further losses” and stabilize the business to prepare a sale.

But those cost cutting measures didn’t work. The company said that it faced pressure from landlords, vendors and with secured lenders.

Premier Kings generated $223 million in sales in 2022 and had an operating loss of $27 million. Bankruptcy court documents also reported $134.5 million in assets and $123.1 million in liabilities.

The company has deals with a pair of “stalking horse” bidders vying for parts of the company totaling about $34 million. One is for $15.5 million with RRG of Jacksonville for 44 stores in the Savannah, Ga., and Jacksonville, Fla., regions. The other is for $18.5 million for the purchase of 31 stores in North Alabama with the Newell-Berg Alliance AL.

A stalking horse bid is used as an opening bid in an auction. There are at least 44 potential bidders for at least some of the restaurants.

Burger King struggled with weak sales coming out of the pandemic while costs for labor and food took off. Two large-scale operators, Meridian Restaurants and Toms King, filed for bankruptcy and were sold. In both cases, however, not all of the stores were sold and numerous locations were shut down.

The company has been steering many stores into the hands of smaller operators it believes are more capable of improving operations at the restaurants and generating stronger sales in the process.

Burger King earlier warned that it expected to spend the rest of the year working with franchisees to close underperforming stores. It also said that most of $10 million of bad debt expense it expects to record in the fourth quarter will come from Burger King U.S.

The company has shown stronger sales this year while traffic last quarter outperformed its competitors. Burger King is investing $400 million into marketing and remodels to lift sales and has focused intently on improving operations and franchisee profits. The company said that franchisee profitability is up in the “double digits” so far this year.