BurgerFi announced Friday that bankruptcy may come soon after continued sales declines and an inability to pay off debt.
The information was part of a filing to notify the SEC that the company will be late submitting its quarterly earnings report for the second quarter. BurgerFi also owns Anthony’s Coal Fired Pizza & Wings.
Due to the company defaulting on its credit agreement with TREW Capital Management, and because the forbearance period has ended, the lender now has the right to demand immediate repayment of the debt, according to an SEC filing. If BurgerFi cannot pay, the lender could take control of or sell the company’s assets to recover the money owed.
“The Company further expects that if the Company does not receive adequate relief from its senior lender and additional
sufficient liquidity from potential liquidity providers or from sales of the Company’s assets to meet its current obligations, it may seek protection under applicable bankruptcy,” BurgerFi said in the SEC filing.
TREW is led by Jeff Crivello, the former CEO of Famous Dave’s. The private equity firm recently agreed to use a $40 million credit bid to acquire Rubio’s Coastal Grill out of bankruptcy.
BurgerFi anticipates a 4 percent drop in restaurant sales during the second quarter year-over-year, fueled by lower same-store sales and closure of underperforming corporately owned locations. It also expects a net loss of $18.4 million, compared to $6 million a year ago, and a 5-percentage-point increase in restaurant-level operating expenses, primarily because of higher wages and lower sales leverage. It reported cash and cash equivalents of $4.4 million as of July 1.
In addition to the potential bankruptcy, BurgerFi said in a filing on Thursday that it entered an Emergency Protective Advance Agreement to secure a $2.5 million loan to address pressing financial obligations. To meet the terms of the deal, the company must obtain Letters of Intent by August 28. These LOIs are agreements from potential buyers showing interest in purchasing some of BurgerFi’s assets. The purpose of these asset sales is to generate enough funds to pay off the company’s debt.
These SEC filings come about two and a half months after BurgerFi revealed it was exploring strategic alternatives to move the business forward. The chain said there are no assurances that the strategic review process will result in an outcome favorable to the company or shareholders.
Also, BurgerFi said earlier this year that it defaulted on a credit agreement with $51.3 million outstanding. The action occurred because the company didn’t meet a minimum liquidity requirement. It then entered a forbearance agreement with TREW. L Catterton and TREW agreed to lend up to $2 million each to help BurgerFi during the strategic review process.
As part of the changes, executive chairman Ophir Sternberg stepped down and was succeeded by board member David Heidecorn, a senior adviser and former partner at L Catterton. The private equity firm has been one of BurgerFi’s largest shareholders since 2021, when it sold Anthony’s Coal Fired Pizza & Wings to BurgerFi.
BurgerFi—which went public in late 2020 via a special purpose acquisition company—has struggled to gain traction in the post-COVID environment. The chain’s same-store sales fell 8 percent in 2023 and 9 percent in 2022. In Q1 of this year, comps dropped 13 percent and systemwide sales decreased 17 percent. Also, unit count is now 102 restaurants after closures of 14 stores in 2023 and eight stores in Q1 alone. The fast casual is close to falling below the 100-unit threshold for the first time since 2018.
CEO Carl Bachmann joined the company in July 2023 to provide a spark. Since then, BurgerFi has operated under a five-point plan focusing on updating infrastructure and technology, enhancing the menu, redefining the store footprint, implementing gold standards, and strengthening brand awareness. Although sales have been down, Bachmann has maintained optimism and told investors recently that he’s “more confident than ever that joining the company was the right decision.”
