The popular fast food chain, which was once more expensive than competitors, is now facing some pretty major bankruptcy problems. Meridian concluded by saying it had failed to recover from COVID-related complications in a post-COVID world of higher wages, increased shipping and operating costs, food inflation and declining traffic, all exacerbated by the national labor shortage . The cumulative cash flow problems left the franchisee with an excessive debt burden. Before the auction, Meridian Restaurants Unlimited LLC owned only two brands: Burger King and Black Bear Diner. (Looks like it’s time to shine at Black Bear Diner.)
In September 2022, Burger King announced a $400 million “Reclaim the Flame” comeback plan, which includes closing 300 to 400 restaurants across America and weeding 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 the Meridian units may be a disappointment for BK, but it is consistent with the company’s previously announced geographic concentration strategy. Burger King’s business model is based on private franchisees operating BK stores around the world. BK now plans to treat franchisees differently in the future and limit operators to 50 branches, all of which must be located in approximately the same region. Hopefully, this tactic will prevent large franchisees from having to be systematically dismantled in federal bankruptcy court (or at least prevent this from happening so often).