BurgerFi Is Latest Restaurant Chain To Go Bankrupt

The Florida-based hamburger and pizza chain BurgerFi International Inc. filed for Chapter 11 protection in Delaware on Wednesday amid a consumer spending squeeze, citing debts of between $100 million and $500 million.

In August, the company, which also owns the Anthony's Coal Fired Pizza & Wings restaurant chain, warned that it might file for bankruptcy, saying in a filing with the U.S. Securities and Exchange Commission that it had only $4.4 million of cash on hand as of July 1. 

The Fort Lauderdale company also said at the time that it expected to report net losses of $18.4 million for the quarter ended July 1, triple the $6 million loss it disclosed for the same quarter the previous year.

“In the face of a drastic decline in post-pandemic consumer spending amidst sustained inflation and increasing food and labor costs, we need to stabilize the business in a structured process," said Jeremy Rosenthal, BurgerFi’s chief restructuring officer, in a press release on Wednesday.

"We are confident that this process will allow us to protect and grow our brands and to continue the operational turnaround started less than 12 months ago and secure additional capital,” Rosenthal said.

BurgerFi’s 144 total locations — 93 of its burger restaurants and 51 Anthony’s units — are operating normally despite the bankruptcy, BurgerFi said.

Inflation has led to higher costs and lower sales for many restaurants as cash-strapped consumers have started spending less, contributing to a number of brands filing for bankruptcy recently, including Red Lobster, World of Beer, Buca di Beppo and Rubio’s Coastal Grill.

BurgerFi went public in 2020, agreeing nearly a year later to buy Anthony’s for $161 million in a move that added Anthony’s existing debt and $53 million of new junior debt to BurgerFi’s books, according to company information at the time.

But that IPO led to a shareholder lawsuit, with investor Lion Point Capital LP alleging it lost more than $26 million when BurgerFi failed to register its shares in a timely fashion during the public offering.

The chain said in July that it had settled the litigation, agreeing to pay Lion Point $1.35 million and issue it 300,000 shares of Series A preferred stock.

In July 2023, BurgerFi began a turnaround plan aimed at reversing sales declines, high employee turnover and a stale menu, which led it to close 19 underperforming company-run locations, according to the chain.

It is also competing with larger and more well-known rivals selling upscale burgers, particularly Shake Shack and Five Guys, according to independent restaurant consultant John Gordon.

“They were living on the edge earlier this year,” Gordon said, noting the continued negative net income and shuttered stores, as well as BurgerFi’s move to the upscale burger market later than competitors.

The acquisition of Anthony’s also was “very strange,” he said, in part because it did not create operating synergies between its burger and pizza outlets.

Landlords, as well as suppliers including Sysco Corp. and U.S. Foods Inc., are listed as major unsecured creditors. Lion Point Capital is also listed with an unsecured $675,000 shareholder litigation claim.

In addition to Lion Point, investors who own at least 10% of BurgerFi shares include Lionheart Equities LLC, Walleye Capital LLC and CG2 Capital LLC.

BurgerFi hired Sitrick and Company to handle strategic communications, and in August, it brought on Rosenthal of Force 10 Partners LLC to head its restructuring. The company plans to file first-day motions that seek to pay employee wages and benefits, and to continue customer rewards and gift card programs, among other relief, it said.

The case was assigned to U.S. Bankruptcy Judge Craig T. Goldblatt.

Proposed counsel for the debtors is Thomas J. Francella Jr., Carollynn H.G. Callari, Robert S. Marticello, Hamid R. Rafatjoo and David S. Forsh of Raines Feldman Littrell LLP.

The case is In re: BurgerFi International Inc. et al., case number 24-12017, in the U.S. Bankruptcy Court for the District of Delaware.

—Editing by John Campbell and Dave Trumbore.