A Burger King franchisee is closing 26 locations across Michigan after a dispute with the fast-food giant.
In a WARN notice, EYM King of Michigan said it will stop operating in the state because of the "unforeseen business circumstance" of not reaching an agreement with Burger King. Restaurants began shutting down March 17 and closures will continue through April 15. In total, 424 employees will be laid off.
Earlier this year, Burger King sued EYM King over breaking franchise agreements related to "failure to timely pay amounts due to BKC in relation to the operation of Burger King Restaurants located in Michigan." The brand is looking to claw back royalties, advertising, and other fees. The amount owed exceeds $75,000, according to court documents. Fourteen of the 26 restaurants were listed in the filing.
The news is another sign of Burger King's struggles. So far this year, two franchisees have declared bankruptcy. Both 90-unit TOMS King and 120-unit Meridian Restaurants Unlimited entered court proceedings, blaming COVID, increased costs, labor issues, and unrelenting liabilities.
Burger King has faced troubled sales in recent years. In a recent earnings call, the chain revealed it earned $140,000 in average four-wall EBITDA in 2022, which is lower than pre-COVID. In response, the chain implemented a $400 million "Reclaim the Flame" comeback plan, including a $200 million remodel program, $50 million refresh, and $150 million in advertising and digital investments.
In November, it was announced that Patrick Doyle, a former Domino's CEO, would take over as RBI's executive chairman. As part of the move, the industry veteran is investing $30 million in the company. A month ago, Doyle said Burger King's best way to compete with the likes of McDonald's is the Whopper. The chairman believes the burger may be a bigger brand than Burger King itself. But there's a wide gap to make up. McDonald's U.S. comps grew 19.7 percent in 2022 on a two-year basis while Burger King's same-store sales lifted 6.9 percent over two years.