Carl Bachmann, CEO of BurgerFi and Anthony’s Coal Fired Pizza & Wings, told investors Monday he’s “more convinced than ever” both companies have strong opportunities and growth potential ahead. But it’s going to take some time.

BurgerFi revealed it recently defaulted on a credit agreement with $51.3 million still outstanding. The action occurred because the company didn’t meet a minimum liquidity requirement. The brand is in active discussions with lenders on solving the default, but it also acknowledged it cannot “predict the results of any such negotiations.”

The news comes after BurgerFi reported in late January it received a delisting notice from Nasdaq because it wasn’t meeting the minimum stock price requirement of $1 per share. The fast casual hasn’t been above $1 per share since early December. It closed Tuesday at 57 cents per share.

Sales have been a struggle for the two chains. In Q4, BurgerFi’s same-store sales dropped 10 percent compared to a year ago; its systemwide sales dropped 9 percent, year-over-year, to $33.9 million. Anthony’s fourth-quarter comps decreased 3 percent versus Q4 2022. On a consolidated basis, total revenue was $41.5 million in the quarter, down from $45.2 million in 2022.

READ MORE:

BurgerFi’s Turnaround Takes a Cinematic Twist

BurgerFi Shows Confidence in Turnaround Despite Sales Dip

BurgerFi’s Comeback Journey Officially Begins

For full-year fiscal 2023, BurgerFi’s same-store sales decreased 8 percent and Anthony’s fell 1 percent.

Bachmann noted BurgerFi’s company and franchised locations experienced sequential improvements in same-store sales and traffic versus the third quarter. But the brand continued to face volatility into the new year. The CEO attributed the challenged sales to normalized trends versus COVID and softer demand in the Florida market. Although Anthony’s same-store sales dipped in Q4, it did see a sequential improvement in comps and traffic compared to Q3 and showed an encouraging performance during the holidays. The casual-dining chain faced a tough January, but trends lifted afterward, with March being flat to slightly positive.

Restaurant level profit margin was 12.5 percent for the fourth quarter, compared to 13.9 percent in 2022. The decrease was primarily related to lost sales leverage. However, the company has seen improvement in food, beverage, and paper costs and operating expenses.

The company expects BurgerFi to return to positive same-store sales and positive EBITDA by the second half of this year. Anthony’s should return to positive comps and EBITDA as well, although Bachmann didn’t indicate when that’s projected to occur.

BurgerFi has 108 restaurants (80 franchised and 28 corporately owned). The chain debuted eight new franchised locations in 2023, well below its previous projection of 12-15 openings. The fast casual also shuttered 14 stores. The footprint is down from roughly 125 restaurants in 2020 when the company decided to go public.

The brand has spent the past few months examining its franchise ownership.

“We took a really good look at our franchise system from two perspectives. Do we have the right franchisees and are we giving them the level of support?” Bachmann said. “So we really worked hard to improve our support, our communication on that side of it, and we got to work on it early and I think the end result is you’re seeing a much better level of communication support between franchisor and franchisee as we’ve elevated the support and communication. We’ve also determined that there were certain franchisees in the system that were not a good fit for us and that’s why we’ve made those closures.”

Bachmann added BurgerFi has received ample interest in nontraditional growth. The brand sees opportunities in airports, amusement parks, casinos, hotels, and movie theaters. In 2023, a franchised BurgerFi restaurant opened within Apple Cinemas in Rochester, New York. The location provides in-theater service in which guests scan QR codes during movies to have food delivered to their seats. The venue also allows for third-party delivery services. Apple Cinemas is planning to open a second BurgerFi unit in Warwick, Rhode Island.

“So a lot of good franchise growth coming, and we’re seeing a much better interest from existing franchisees that are really looking for their second or third concept,” Bachmann said. “So franchisees that have operational structure, financial structure, and their own infrastructure that they can support, that’s the kind of partners that we are looking and engaging and starting to see quite a bit of new interest as a result of that.”

Despite negative sales and traffic trends, Bachmann said BurgerFi and Anthony’s are making progress on their five strategic priorities. The first is infrastructure. Restaurants are 95 percent staffed, and in terms of turnover, BurgerFi is in line with industry standards and Anthony’s is outperforming the industry. Because of this, not as much training is needed and labor costs are lowering. Also, it’s resulted in better consumer satisfaction scores and faster throughput and ticket times.

Infrastructure means better technology, too. In Q1, BurgerFi began using an operations management platform and started to roll it out to Anthony’s. The innovation allows the company to manage all inventory and labor across company-owned locations. In April, the company will begin launching Toast’s POS and management system across Anthony’s stores. Part of the process will include handheld tablets for servers, which will fire tickets directly into the kitchen as opposed to the previous paper ticket system.

A second pillar is taste and quality. For example, BurgerFi launched new chicken wings, four types of bowls, and a grilled and crispy chicken sandwich option in 31 company-owned restaurants. The chain wants to be part of the so-called “chicken wars,” and has seen the protein lift 4 to 5 percentage points in sales mix. Also, two recent burger LTOs—the “Yes, Chef” Burger and Prime Rib Burger—account for more than 4 percent of overall mix. Meanwhile at Anthony’s, it launched new classic Italian items, including spinach and artichoke dip, spaghetti and meatballs, Fettuccine Alfredo, and a meat Stromboli. It also brought back its original arugula burrata salad and is now testing new shrimp pastas and pizzas.

The next initiative is developing what Bachmann calls “gold standards.” The chain has worked to improve its bun quality, all-natural Angus beef, French fry process, and the exclusive plant-based VegeFi burger. The fourth priority is doing a better job of telling the world about both brands through an enhanced marketing strategy. So far, social media engagement rates are lifting, with 60 percent net positive sentiment at BurgerFi and 56 percent at Anthony’s.

The fifth and final strategy is redefining the store portfolio. In addition to shuttering underperforming restaurants, BurgerFi bought two franchised outlets in South Florida to solidify its presence in core markets. However, Bachmann noted that this won’t be a common maneuver.

“I am more confident than ever that I made the right decision to join the company,” Bachmann said. “Sales and margin improvement will not happen overnight, but we are laying the foundation to grow upon. We are making very educated, smart decisions using a very simple formula. We must win for our guests, we must win for the team members, and we must win the shareholders and franchisees.”