If we look at the history of Burger King, it has made a name for its delicious and unique offerings. However, over the years, it has changed ownership multiple times and experienced ups and downs due to increased competition and other factors. So, is Burger King going out of business? Let us investigate.
No, Burger King is not going out of business. It is working hard to thrive in competition. However, Burger King has been shutting down some of its restaurants due to financial problems some franchises face.
With the ever-expanding fast-food restaurant industry, competition for Burger King business is becoming increasingly fierce. As a result, it has put them under pressure to perform better. Moreover, factors like inflation, operational challenges, and economic crisis have also affected Burger King’s business.
So, let’s find out more about Burger King’s business in this article. It will help you understand why Burger King’s restaurants are shutting down and whether such steps will affect its business.
What's In The Post
Will Burger King Run Out Of Business By Year End?
No, Burger King will not be out of business by year-end. They are closing 300–400 stores this year as several large Burger King franchises have filed for bankruptcy.
Most of the closing stores belong to the Meridian Restaurants Unlimited franchise. The other two franchises, EYM King and TOMS King, also declared bankruptcy.
Utah-based Meridian filed for Chapter 11 bankruptcy protection in March when it had $14 million in unsecured debt and 120 restaurants. As per QSR; Meridian is holding onto just 21 stores, selling off 70 Burger Kings for just over $17 million total.
Similarly, Illinois-based TOM King Holdings had most of its BK outlets in Northern America. When it suddenly decided to sell out around 90 outlets of its current holdings in 2018, it resulted in many Burger King stores shutting down.
Furthermore, under EYM King, Burger King has closed 26 stores in Michigan. According to Restaurant Business Online, EYM King said in the notice that “unforeseen business circumstances and inability to resolve with Burger King Corp” were the causes of the closures.
But Why Are Burger King Stores Closing?
Burger King decided to close stores based on their earnings. Thus, Burger King is closing stores for the franchises that have declared bankruptcy. It has been a regular practice of Burger King, as they aim to deal with high-profit franchises.
Burger King wishes to work with smaller franchises to improve its restaurant operations. They plan to reinforce the rules on expansion to favor only better operators with fewer locations. Focusing on smaller franchises that are financially successful can boost the brand’s profitability and financial performance.
Moreover, smaller, high-profit franchises often operate more efficiently, with lower overhead costs and better management practices. Besides, a strong network of high-performing franchises can enhance the brand’s image and reputation.
Sharing this intent, Burger King CEO Joshua Kobza released a statement and said that the company wants to maintain relations with smaller franchises to “improve the overall health” of the company’s franchise system. He also added that they aim to keep franchise operations under 50 stores.
“One of the most important factors is the willingness of our franchisees who have troubled restaurants to work with us and commit to implementing the changes necessary,” Josh Kobza, CEO of Burger King’s parent Restaurant Brands International, told investors. “If they can’t, operators are ready to step in and do what’s required.”
For the past two years, Burger King has focused on making operational improvements. They believe that it is the key to improving its sales and profitability over the long term.
Will Burger King Continue To Close Its Stores?
Yes, Burger will continue to close stores if they do not yield profit. However, they will only happen in stages.
The closures will, for the most part, occur on a rolling basis when franchise contracts are renewed or canceled. President of Burger King in America, Chris Finazzo, said, “Closing low-volume restaurants creates a virtual cycle of improved profitability.” He also believes that there is room for more locations to open.
Prioritizing well-situated or high-sales locations is sure to boost Burger King’s business. However, “sales and traffic are the start of this equation,” according to Kobza. Many more factors contribute to making such a decision.
The company has “worked closely with our partners to identify underperforming, unprofitable restaurants that make sense to close,” RBI CEO Jose Cil said on the second-quarter earnings call.
“We believe this process of replacing older parts of our network with new modern restaurants and strong locations drives substantial benefits and returns for our partners and us over the long term.” Thus, the brand plans to open new stores with better image, experience, and technology.
What Can Cause Burger King To Ever Go Out Of Business?
Like any business, Burger King could face challenges that might lead to financial difficulties or the possibility of going out of business. While the brand is a well-established and globally recognized fast-food chain, here are some factors that could, in theory, contribute to Burger King facing financial challenges.
- Changing Consumer Preferences: As consumer preferences shift toward healthier eating options, more diverse cuisines, or other dining experiences, fast-food franchises such as Burger King may suffer.
- Competition: Intense competition in the fast-food business can result in market share issues and margin pressure. Competitors who launch novel or popular products can constitute a threat.
- Operational Challenges: Inefficient operations, quality control issues, or difficulties in managing franchise relationships can impact the performance of individual restaurants.
- Universal Health Crises: Health crises like the COVID-19 pandemic can significantly impact restaurant operations owing to decreased foot traffic, changes in consumer behavior, and forced closures.
- Issues With Franchises: Disputes with franchises, lawsuits, or financial issues among franchise operators can all impact the brand’s viability.
- Raise in operation costs: Increases in labor, food, and operating costs can reduce profitability. Labor cost pressures, in particular, can impact fast-food businesses.
- Economic Crisis: A severe and lengthy economic recession or downturn can lower consumer spending on dining out, affecting fast-food chain revenues.
If you have been wondering whether Burger King is going out of business, that’s not true. Burger King has been closing down franchise stores, showing less profitable sales, and has declared bankruptcy. In place of them, Burger King aims to have future tie-ups with smaller franchises that could be beneficial.
The Burger King franchise system not only helps in making profits for the restaurant chain, but it is also profitable for franchise owners. If you are interested in working at Burger King, take a look at our detailed article on what age Burger King hires.
While at it, why not also understand the Burger King horse meat controversy that made headlines? I’m sure you will be happy to learn more about these topics. If you have questions regarding Burger King, please ask them in the comments section below.
Frequently Answered Questions (FAQs)
Is Burger King going out of business?
No, Burger King is not going out of business.
Is Burger King shutting down stores?
Yes, Burger King is shutting down stores that have not generated good sales.
Does Burger King have a franchise?
Yes, Burger King has many franchises.
Can Burger King ever go out of business?
Yes, Burger King can go out of business due to several reasons. These include competition, changing consumer preferences, issues with franchises, universal health crises, and more.