Fast-food chain BurgerFi is facing significant challenges and could potentially cease operations.
BurgerFi's financial predicament underscores the struggles some fast-food chains have faced lately, as customers grow weary of high prices and opt for dining at home or seeking more affordable options when eating out. Establishments like McDonald's, Starbucks, Burger King, and Wendy's have reported decreased customer foot traffic and overall sales, prompting them to introduce value meals to attract customers. In a similar situation, Mod Pizza is battling against bankruptcy, while Red Lobster filed for bankruptcy recently.
According to a filing with the Securities and Exchange Commission (SEC), if BurgerFi fails to secure financial aid from its senior lender or obtain cash from external sources or by selling off its assets, it may resort to filing for bankruptcy protection under applicable laws.
As per the credit agreement, BurgerFi's senior lender holds the authority to declare the debt due and payable immediately at any given moment. If such an event occurs, BurgerFi would be unable to repay the loan, potentially leading to the lender seizing and repossessing BurgerFi's assets.
BurgerFi is the overseer of BurgerFi and Anthony's Coal Fired Pizza. Due to the financial deficit, the company is uncertain if it can maintain its 60 pizza locations and 102 burger restaurants.
CNN contacted BurgerFi for comment, but they have yet to respond.
Store closures, according to the company, are primarily responsible for the decline in sales. Additionally, BurgerFi has been affected by a surge in chicken wing prices and higher wages, contributing to an increase in operating expenses.
Assessing potential actions to tackle its liquidity challenges, BurgerFi announced in May that it was exploring "strategic alternatives." Since then, its efforts have included seeking additional funding, selling off either assets or the entire company, and re-evaluating and prioritizing certain obligations over others, as mentioned in the SEC filing.
On August 9, BurgerFi agreed to receive $2.5 million in emergency funding from a lender. However, there's still no guarantee that these initiatives will suffice to cover all outstanding debts, the company stated.
BurgerFi became a publicly traded company in 2020, and its stock has plummeted nearly 60% since then. The stock price dropped 9% and traded at just 33 cents on Monday.
Despite the challenging financial situation, BurgerFi's management is actively investigating ways to boost liquidity, such as seeking additional funding or considering the sale of assets or the company as a whole. The struggle to maintain profitability in the fast-food business, marked by high prices and shifting consumer preferences, has affected many establishments, including BurgerFi.
