More Than 300 Burger Kings Could Be Closing This Year. Here's Why
Between March 17 and mid-April of this year, 424 employees lost their jobs as Burger King franchisee EYM closed all 26 of its Michigan locations. In April, another BK franchisee, Meridian, filed for bankruptcy and announced it was shuttering the doors of at least 27 of its locations spanning Wyoming, Utah, North Dakota, Nebraska, Kansas, Montana, and Minnesota. Yet another franchisee, Toms King, filed for bankruptcy in January but was able to sell the majority of its 90 stores.
Now, the fast food giant is saying that the number of closures could mount to somewhere between 300 to 400 in 2023, a steep hike over the 124 between the first quarter in 2022 and the first quarter of 2023.
Meridian cited inflation and a low volume of sales as reasoning for the failure of the franchises to thrive and couldn't promise that more closures of their remaining restaurants weren't on the horizon. Restaurant Brands International (RBI), Burger King's parent company, acknowledged in a Q4 earnings call in February that profitability is an issue and that some franchisees were continuing to struggle.
"There are some franchisees who are going through some difficulties, whether it's operational or capital structures," incoming CEO Joshua Kobza said. "Our goal ... will be to make sure that we're thoughtful about all the different stakeholders and make sure we get to the right outcomes through those processes, to make sure that all of those businesses are set up to be operationally and financially successful for the long run."
What is Burger King doing to help franchisees?
RBI has more than 7,000 Burger King locations in operation and in September of 2022, the company announced its "Reclaim the Flame" plan to help franchisees improve sales and grow their business. The plan involves an investment of $400 million in both advertisement and restaurant upgrades including improved technology and equipment as well as remodeling.
The primary focus of "Reclaim the Flame" is to improve guests' experience from overall perception of the brand to creating modern facilities, ensuring high-quality customer service, and offering exceptional menu items. Relative to the menu items is their chicken lineup which includes the Royal Crispy Chicken sandwich, which is perhaps a nod to the "chicken sandwich wars" ignited in 2019. The brand also hopes to attract customers by focusing on affordability.
As for advertising, Kobza says that only $7 million of the $150 million slated for that purpose. Since a slight decrease in traffic was partially to blame for some slumping sales, an increase in advertising could be expected to help boost profitability as well.