Financial distress caused by the effects of the Covid-19 pandemic forced several fast-food restaurant chains to file for bankruptcy over the last five years, seeking breathing room to reorganize their businesses.
In some cases, companies restructured their debt and emerged with stronger balance sheets and a chance to remain in business for years to come.
In other cases, debtors had no choice but to sell their assets to their creditors or the highest bidder for the chain to remain in business. And sometimes companies sold off their assets in a liquidation to pay off creditors and went out of business.
Related: Formerly bankrupt burger chain rescued by fast-food rival
BurgerFi, which owned and franchised 144 burger and pizza restaurants nationwide, on Sept. 11 filed for Chapter 11 bankruptcy protection after a turnaround plan, implemented earlier in 2024, failed to produce the necessary results to prevent the filing.
The burger chain closed 19 underperforming corporate-owned locations and reduced related operating costs as part of its turnaround plan.
BurgerFi and the company’s Anthony’s Coal Fired Pizza, faced a drastic decline in post-pandemic consumer spending because of sustained inflation and increasing food and labor costs. Those forces required the company to stabilize the business through bankruptcy, according to Chief Restructuring Officer Jeremy Rosenthal.
BurgerFi International’s parent company TREW Capital Management, which purchased the fast-food chain owner out of bankruptcy with a $10 million credit bid in November 2024, sold the 85-unit BurgerFi brand to rival Savvy Sliders for an undisclosed amount in December 2024 after the burger chain exited bankruptcy.
Several fast-food franchisees have also filed for Chapter 11 in recent months. including Pizza Hut franchisee EYM, with 140 franchises, in July 2024; Arby’s franchisee Miracle Restaurant Group, with 25 locations, in June 2024; and Popeyes franchisee RRG Inc., with 17 locations, in February 2024.
Hwy 55 Burgers Shakes & Fries
Hwy 55 burger chain files for Chapter 11 bankruptcy
Finally, the parent company of the Hwy 55 Burger Shakes & Fries restaurant chain filed for Chapter 11 bankruptcy suffering from costs and labor shortages related to the Covid-19 pandemic, which coincided with its brand expansion, according to a company statement.
Related: Popular beverage chain files for Chapter 11 bankruptcy
The Little Mint Inc., which operates 22 corporate-owned Hwy 55 locations and has 71 franchised locations in the Southeast, filed its petition on Dec. 31 in the U.S. Bankruptcy Court for the Eastern District of North Carolina, seeking to restructure its debt.
The debtor closed 13 corporate-owned locations before it filed for Chapter 11 protection.
The Mount Olive, N.C.-based debtor listed $1 million to $10 million in assets and $10 million to $50 million in liabilities in its petition. The debtor estimates that it has about $11 million in secured debt and $5.8 million in unsecured debt.
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The company’s largest unsecured creditors include Sysco Food, owed over $782,000; the North Carolina Department of Revenue, owed $600,000 in sales tax revenue; and Retail Data Systems, owed over $594,000.
The company operated at a loss in 2022 and 2023 and reported $24.4 million in annual revenue in 2023, according to court papers.
The debtor has not filed a motion seeking debtor-in-possession financing as of Jan. 6.
The fast-food chain, which operates in North Carolina, South Carolina, Georgia, Florida, Tennessee, and Texas, was founded in 1991 as Andy’s Cheesesteaks & Cheeseburgers. It began franchising and changed its name to Hwy 55 Burgers Shakes and Fries in 2012, according to a declaration by company founder and president Kenneth K. Moore.
Hwy 55 had bad timing on expansion
The company began expanding its locations in 2018 with a plan to transition away from strip malls to standalone buildings with pick-up windows to bring the company in line with modern trends and to remain competitive in the industry.
The company sought financing to open new stores in 2019, but loans never materialized, and then the pandemic in 2020 caused multiple headwinds that delayed opening new locations.
The debtor opened 30 new locations from 2021 to 2024 under contractual obligations but with nontraditional financing at higher costs. Staffing new locations became difficult due to government relief programs and rising wage increases.
Hwy 55 also could not raise its menu prices, since its customer base was dependent on fixed incomes and any price increase would substantially impact sales to its customers, the declaration said.
At the same time, the company faced rising prices for equipment and goods due to supply chain issues and inflation.
A year before filing, the debtor needed to replace its in-house accounting department after discovering it had not been making regular payments to utilities, taxing authorities, and other ordinary course payments and had mismanaged the company’s finances.
The debtor filed its petition after receiving creditor payment demands, collection efforts from the North Carolina Department of Revenue, and an expiration of a forbearance agreement with a food distributor.
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