Burger King Reports Large-Scale Shutdowns As Bankruptcies Hits America’s Biggest Restaurant Chains
By Investment Watch Blog
The second-largest fast-food chain in the U.S. is being ravaged by the ongoing economic downturn. Burger King is reporting that mass shutdowns are about to occur as foot traffic dramatically declines, sales disappoint, and several franchises file for bankruptcy. An alarming number of restaurants will be closed by the end of 2023, executives say. The company is dealing with increasingly tough competition in the marketplace from the likes of McDonald’s and Chipotle. Burger King also faces pressure from more upmarket chains including Five Guys and Shake Shack. Its U.S. operations have been struggling with profitability for years, and now many Americans will be forced to say goodbye to their local Burger King.
Since 2019, the company has been shuttering around 130 locations per year, with numbers varying due to economic reasons. Before the pandemic started, the U.S. had over 7,300 Burger King restaurants. Now, with 500 fewer stores, the chain is announcing what seems to be the biggest wave of closings it ever reported as its franchises fall into bankruptcy and the company acts to prevent a potential financial collapse. During an earnings call last week, the CEO of Restaurant Brands International Inc., the parent company of Burger King, stated that he plans to close 400 underperforming stores this year to streamline the fast-food brand. “Historically, we’ve closed about a hundred units at Burger King US,” CEO Joshua Kobza said in a Q1 earnings call on last Tuesday. The expected closures this year will be well above the historical average. “Foot traffic was negative this quarter,” Kboza noted.
Analysts told DailyMail.com that Burger King has been suffering with lagging sales in 90% of U.S. states, trailing behind Wendy’s and its main rival, McDonald’s. They said that the chain was at risk of entering into a ‘death spiral’ if it failed to play catch-up with its rivals. In the first three months, three Burger King franchisees have declared bankruptcy, including Illinois-based Toms King, Michigan-based EYM King, and Utah-based Meridian Restaurants Unlimited. At the same time, the company acknowledged that its revitalization would still result in more franchisees filing for bankruptcy or selling their business to other operators.
Industry experts note that the restaurant chain’s troubles significantly deteriorated since the pandemic. The firm was badly positioned when the health crisis hit compared to its rivals. Its digital platform was behind, so the brand scrambled to keep up with the demand for delivery when people could not visit restaurants in person.
The chain also suffered from a series of ill-fated menu revamps – including the Impossible Burger. Launched in 2016, executives said it was a meat-free alternative that couldn’t be found anywhere else in the fast food industry. But they faced a huge backlash when they admitted it would be cooked on the same equipment used for beef and chicken. Burger King must conduct this new business strategy very carefully because the chances it may turn out to be a failure are rising. Not even the biggest restaurant chains in America will be immune to the challenges that are coming for us. And it would be a shame to see this popular brand fading in the background.
