Miracle Restaurant Group, a 25-unit Arby’s franchisee, filed bankruptcy on June 20 after facing financial challenges exacerbated by the COVID pandemic.
The company, founded in 2005, has stores across Illinois, Indiana, Texas, Mississippi, and Louisiana. It listed $1 million to $10 million in assets and liabilities.
In the court filing, manager Donald Moore cited inflationary pressures on commodity and labor costs that outpaced price increases, leading to a significant erosion in variable cash flow. In 2023 and the first half of 2024, negative same-store sales and disappointing performances from newer stores (built within the past three years) led to extremely low or negative cash flows. Despite attempts to sell underperforming stores in Texas and Illinois, negative EBITDA and poor sales performance hindered these efforts. Additionally, working capital has been impacted by delays in receiving tax refunds from the IRS, according to court documents. The group is awaiting $3.54 million in ERTC refunds from the federal government, which have been delayed since February 2023.
The franchisee looked to its landlord and Arby’s for relief, but it’s not been enough to prevent bankruptcy.
In September 2023, Miracle Restaurant Group sold three units in Indiana and used proceeds to pay down debt with First Franchise Capital, the LH Mortage, and the U.S. Small Business Administration. In the future, it plans to sell seven stores in Texas, eight in Illinois, and two remaining stores in Indiana while focusing on its Louisiana and Mississippi locations. The company has retained Peak Franchise Capital, LLC, as a financial advisor to assist with the marketing and the selling of its restaurants. The group employs 322 individuals, with 31 full-time and 291 part-time employees.
The group previously operated over 60 stores and filed for bankruptcy in 2010, successfully restructuring and paying all creditors in full under the confirmed plan.
Miracle Restaurant Group joins several entities that have declared bankruptcy thus far in 2024, including Red Lobster, Rubio’s Coastal Grill, Tijuana Flats, Sticky Fingers, Oberweis Dairy, Foxtrot and Dom’s Kitchen, a 48-unit Subway franchisee, a 17-unit Popeyes franchisee, and a six-unit Alamo Drafthouse Cinemas franchisee. Corner Bakery Café filed for bankruptcy in 2023, along with major franchisees from Burger King, Wendy’s, CKE, Popeyes, Denny’s, and McDonald’s.
