Bankrupt Burger King Franchisee Unloads Nearly 6 Dozen Stores

Major franchisee Meridian Restaurants Unlimited just pulled out of the Burger King game. Meridian filed for Chapter 11 bankruptcy protection back in March, when it had $14 million in unsecured debt and 120 restaurants. By the time the auction took place on September 19, only 91 units were left. Now, Meridian is holding onto just 21 stores, selling off 70 Burger Kings for just over $17 million total, reports QSR. (Per the court documents from the auction, no other bids were high enough to sell the remaining units.) During the auction, Meridian filed a motion in the court requesting permission to close all 21 of its remaining stores.

Meridian owed significant debts to Burger King, various lenders, and vendors, and following its bankruptcy filing, the company suggested or rather insisted that the franchisee put its remaining restaurants up for sale and cut its losses. Meridian's 91 stores were divided between the Burger King company (which bought 32 units for $4.7 million) and four other regional operators. Franchisee Kansas King purchased 16 units for $2.2 million, Dakota Restaurant Partners bought 12 locations for $3.4 million, and Kraf purchased seven Arizona units for $7 million. Perhaps the most shocking figure came from Snake River Foods, which paid just $632,250 for three Burger King stores in Montana. Another prominent Burger King franchisee, TOMS King Holdings (which owned 90 units), also declared bankruptcy earlier this year.

The beloved fast food chain that was once more expensive than competitors is now dealing with some pretty major bankruptcy issues. Meridian closed citing failure to recover from COVID-related complications into a post-COVID world of increased wages, increased shipping and operational costs, food inflation, and declining traffic, all compounded by the national labor shortage. The cumulative cash flow issues left the franchisee overburdened with debt. Prior to the auction, Meridian Restaurants Unlimited LLC owned just two brands: Burger King and Black Bear Diner. (Looks like it's Black Bear Diner's time to shine.)

In September 2022, Burger King announced a $400 million "Reclaim the Flame" comeback plan – part of which will include shuttering 300 to 400 restaurants across America as it culls out underperforming franchisees. Similar performance issues will force Applebee's to close an estimated 25 to 35 restaurants by the end of 2023.

This dissolution of Meridian's units might be a bummer for BK, but it aligns with the company's previously announced geographical concentration strategy. Burger King's business model relies on private franchisees to run BK stores around the world. Now, BK plans to handle franchisees differently moving forward, limiting operators to 50 stores, all of which must be located within roughly the same region. Hopefully, this tactic will keep large franchisees from having to be systematically dismantled in federal bankruptcy court (or at least prevent it from happening quite so often).