Fast food chain Burger King is facing significant bankruptcy issues, a far cry from when it used to be more expensive than its competitors. Meridian, the franchisee that owned Burger King and Black Bear Diner, closed down due to its inability to recover from COVID-related complications and the challenges of operating in a post-pandemic world. Factors such as increased wages, operational costs, food inflation, and declining traffic, coupled with the national labor shortage, contributed to the franchisee’s financial difficulties and accumulating debt.
To combat these problems and stage a comeback, Burger King introduced the “Reclaim the Flame” plan worth $400 million in September 2022. As part of the plan, the fast food chain aims to close down 300 to 400 restaurants across the United States, targeting underperforming franchisees. Similarly, Applebee’s, another popular restaurant chain, plans to shut down an estimated 25 to 35 locations by the end of 2023 due to similar performance issues.
This closure of Meridian’s units aligns with Burger King’s geographical concentration strategy, which the company had previously announced. Moving forward, Burger King plans to handle franchisees differently by placing limits on the number of stores they can operate. Franchisees will now be restricted to owning a maximum of 50 stores, all located within the same region. This approach aims to avoid the need for large franchisees to be systematically dismantled in federal bankruptcy court, mitigating the risk of future failures.