BurgerFi International’s financial woes are deepening, pushing the fast-casual chain with 162 combined locations closer to potential bankruptcy.
In a recent federal securities filing, the company revealed it expects a net loss of $18.4 million for the quarter ended July 1, a steep increase from the $6 million loss in the same period last year.
The company blamed this downturn on lower operating income, higher expenses, and restructuring costs.
These issues have raised serious doubts about BurgerFi’s ability to continue as a going concern, according to the filing.
This isn’t the first sign of trouble for BurgerFi.
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The company has been struggling since it went public in 2020 through a special purpose acquisition company (SPAC).
Even in its early days as a public company, it faced challenges meeting Nasdaq compliance requirements.
Restaurant-level operating expenses have climbed to 91% of sales, up from 86.2% a year ago.
This increase is driven by higher wages, lower sales, and rising prices for ingredients like chicken wings.
Overall, restaurant sales decreased by about 4%, with both BurgerFi and its sister brand Anthony’s seeing declines in same-store sales.
BurgerFi draws $2.5 million in emergency funding. The agreement comes shortly after the company settled a lawsuit with a shareholder and announced it is undergoing a ‘strategic review process’ https://t.co/HWeWTKAh8H pic.twitter.com/GRM1IzYz5i
— Restaurant News (@NRNonline) August 16, 2024
In response to these challenges, BurgerFi has closed several underperforming locations.
The company shuttered 14 restaurants in fiscal 2023 and another eight in the first quarter of this year.
Carl Bachmann, who joined as CEO in 2022 to lead a turnaround effort, has been working to improve BurgerFi’s menu and expand its presence.
However, these efforts haven’t been enough to offset the company’s mounting financial troubles.
In May, BurgerFi entered into a forbearance agreement with lender TREW Capital Management Private Credit and private-equity firm L Catterton.
This agreement included an additional $4 million loan to support the company during a strategic review process. However, the forbearance period has now expired, leaving BurgerFi in a precarious position.
BurgerFi says it may file bankruptcy https://t.co/nXlVTxFN1j #Financing Read more ⬇️
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The senior lender could potentially call in the debt, seize assets, or force a halt to operations.
There’s a possibility that TREW, led by former Famous Dave’s CEO Jeff Crivello, might take over ownership of BurgerFi’s assets.
Crivello’s company previously acquired the fast-casual Rubio’s chain out of bankruptcy.
To navigate this crisis, BurgerFi has hired advisors to explore strategic alternatives and work on paying off its debt.
Without relief from its lender or successful asset sales to meet obligations, the company may be forced to declare bankruptcy.
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As of the first quarter’s end, BurgerFi operated 102 units, including 27 company-owned and 75 franchised locations. Anthony’s has about 60 units and had just begun franchising last year.