In the United States, more Burger King restaurants continue to disappear, with closings in July hitting the highest level since January when 124 locations were shuttered in only 26 days. While its main competitors reveal expansion plans and report profit growth, the financial situation of the royal burger chain can only be described as a train wreck.

The company is failing to attract new customers, catch up with its rivals, and dig itself out of the hole it has fallen into during the pandemic. At this point, everyone in the industry is asking where did Burger King go wrong. Luckily for us, newly reported data show exactly why the fast food giant is facing one of the worst losing streaks since its foundation in 1954.

As other fast-food chains started to get back to pre-pandemic levels, Burger King’s sales and traffic fell steeply, and its financial results continued to disappoint. Over the past two years, sales at Wendy’s jumped 18% while McDonald’s saw sales grow by 25%. In contrast, at Burger King, sales went up by a meager 8%.

During a second-quarter earnings call, Josh Kobza, CEO of the chain’s parent company Restaurant Brands International, said that one of the reasons why Burger King is still struggling comes down to new guest visits. Kobza revealed that foot traffic in the first two quarters of 2023 was negative, and most of the earnings growth experienced by the company was fueled by higher menu prices, not by new customers.

Meanwhile, retail experts point to its ongoing woes with the health and profitability of its franchisees as the biggest issue facing Burger King. In a single year, the four biggest fast-food operators in America, including TOMS King Holdings and Meridian Restaurant Unlimited, whose portfolio was mainly composed of Burger King stores, have filed for bankruptcy citing declines in foot traffic and revenue, as well as ‘systemic’ profitability issues.

After shuttering 53 locations in June, 133 restaurants closed doors for good in July, the highest number in seven months. So far, the burger chain has permanently halted operations in 450 locations, 50 more than its initial target.

The vast majority of restaurants have been forced to increase prices to compensate for higher inflation, But Burger King has taken price increases to a whole other level. In a survey conducted by MoneyGeek of 145 chains in 50 cities, the price for a burger, fries, and a soft drink rose 9% on average in the past year. From 2022 to 2023, the price for a meal at the chain rose 21%, from $6.76 to $8.18.

A few months ago, its parent company, Restaurant Brands International, made a strategic hire that laid bare exactly how nervous executives and shareholders were about its economic prospects. Patrick Doyle was formerly the CEO of Domino’s and he is commended by the chain’s drastic turnaround.

Doyle announced plans to “put the heat back into the brand” with a $400 million initiative called “Reclaim the Flame.” Burger King is going to spend $150 million in advertising and digital investments and $250 million in a “Royal Reset” involving new restaurant technology, equipment, and infrastructure. In other words, executives are admitting that the chain is in desperate need of restructuring on every front, from its products to its brick-and-mortar locations.

Hopefully, this initiative shows satisfactory results soon, because up until this point in 2023, Burger King is just getting burned.

Article and video cross-posted from Epic Economist.

New data reveals that Burger King is falling behind major rivals, including McDonald’s, Taco Bell, and Wendy’s, as revenue shrinks and its restaurants continue to lose popularity amongst US consumers. The numbers indicate that the company’s problems are getting exponentially worse in 2023. That’s why today, we are going to expose the factors that are accelerating the demise of this popular brand.

Not one or two, but three major Burger King operators have filed for bankruptcy so far this year. The biggest franchisees in the state of Ohio, Utah, and Michigan have reported severe cash flow problems and a steep decline in foot traffic, sales volumes, and profits for years. They have been operating several stores at a loss, and about 400 of them are going to close doors for good this year. In addition, the company’s executives shuttered 124 underperforming locations between January and May, and another 63 restaurants were eliminated from its portfolio last month, according to reports released by Restaurant Dive.

In all, roughly 10% of Burger King’s 7,400 locations in America are likely to disappear in 2023, industry estimates reveal. Right now, corporate executives are pressuring collapsing franchisees to sell their stores to other operators instead of closing them, which could result in financial losses to the tune of $300 million. Last month, the company joined a filing alongside various creditors and vendors, to force a sale of the remaining units managed by struggling franchisees.

The fast food chain’s US store profitability has been declining for over a decade now. In fact, between 2010 and 2020, Burger King’s annual revenue decreased by 36%. In 2010, the brand made an average revenue of $2.5 billion, whereas that number was only $1.9 billion in 2022. Even before the COVID-19 Pandemic Burger King began to see a concerning decline in revenue. For instance, between 2012-2013 alone, the company’s revenue fell by 41.6%.

The Buy One, Get One for $1 and 2 for $6 promotions on Whoppers and chicken and fish sandwiches proved to be much less popular than the 2 for $5 deal the chain had in 2020, creating a “considerable year-over-year gap” in BK’s earnings.

Despite the strategy shifts announced by the chain, those moves didn’t seem to be enough to help effectively boost its sales. In June, Burger King’s domestic same-store sales grew by 1.1%, but this was a very disappointing gain when compared to its biggest competitor McDonald’s, which grew its sales by 15%. Not to mention, Burger King lost its spot as America’s second-largest burger chain. In 2021, Wendy’s surpassed Burger King to become the nation’s No. 2 burger chain by sales. According to Technomic data, Wendy’s system sales increased by 4.8% last year. Burger King, meanwhile, dropped by 5.4% to $9.6 billion.

It’s clear that the industry giant is not as financially healthy as we all thought and if there’s something that we learned from the retail apocalypse and the bank collapses of earlier this year is that there’s no company that’s too big to fail. A few bad quarters can bring down an empire that has been built over decades, let’s just hope that’s not the case with Burger King.

Article and Video cross-posted from Epic Economist.

For example, in November 2022, Popeyes started closing a number of locations, and it seems like things haven’t changed in 2023. Newsbreak reports more permanent closings in the coming months as sales decline and profits shrink. In California, the chain is facing an even bigger challenge.

Several locations may have to be shuttered after the company broke child labor laws. Teenage employees filed complaints accusing the outlet of forcing them to work long hours and late shifts. The minor employees were asked to skip school for shifts and work past 11 p.m., The Washington Post reported. California labor laws state that those under 18 years old aren’t permitted to work more than four hours on a school day, nor work past 11 p.m.

Meanwhile, one of its biggest franchises, Premier Cajun Kings filed for bankruptcy last month after its founder’s untimely passing coupled with a brutal operating environment left the company in limbo.

Similarly, Chick-fil-A is not showing the financial resilience expected from a chain of this size and scope. The company is amongst the 15 largest fast food chains in America, but that doesn’t mean it is standing on solid footing. The chicken shortage of the past few years has certainly caused some major headaches for Chick-fil-A, which increased prices three times in three years.

Lower sales, higher costs, and supply chain disruptions continued to impact its bottom line, and now several shops are closing doors for good. On top of the shutdowns announced in Florida, Maryland, Alabama, Tennessee, and Missouri, the chain is closings its first-ever restaurant after more than a half-century in business. The company did not reveal the reason for the shutdowns, but CNN experts believe some of the locations haven’t been able to turn out a profit in at least four years.

Moreover, just like rival Starbucks, Dunkin’ is a coffee shop and bakery that offers locals a place to get their caffeine fix on every corner. But East Coast customers may be disappointed to hear that the chain is now closing 450 outlets in the region. An announcement from the company revealed that gas station’s Dunkin’ stores don’t generate much revenue, contributing to less than 0.5% of its sales.

For that reason, the chain is closing such facilities and redirecting all maintenance funds to other successful locations.

“We’re convinced that by leaving these locations with little financial impact, we’ll be better positioned to serve many of these trade regions with new Dunkin’ NextGen stores that have a wider menu in the future,” said chief financial officer Kate Japson. That’s why today, we brought you an updated list of restaurants that announced store shutdowns in the months ahead.

1. Popeyes
2. Chick-fil-A
3. Dunkin’ Donuts
4. Dairy Queen
5. Steak ‘n Shake
6. Krispy Kreme
7. Chuck E. Cheese
8. Quiznos
9. Pie Five
10. Krystal
11. Burgerim
12. Noodles & Company
13. Taco Bueno
14. Papa Murphy’s
15. Qdoba

One of them has gone bankrupt and filed for bankruptcy just 45 days ago, and insiders familiar with the matter are saying that systemic risks are rapidly growing for the food service retailer given that about 30% of franchisees are currently insolvent.

To make things worse, by the end of 2023, 2,000 McDonald’s restaurants may disappear from U.S. cities. Pressure from regulators, labor tensions, and financial losses may force the fast food giant to sharply reduce its brick-and-mortar footprint this year as it faces a reckoning after years of mismanagement, according to the analysis.

The report notes that management is struggling to justify higher fees and other charges to franchisees that are already coping with rising wages and the unrelenting climb in costs for ingredients and packaging which have been eroding profits over the past few years.

Franchisees operate 95 percent of McDonald’s locations in the U.S. and generate about 70 percent of revenue in the country. The National Owners Association estimates that McDonald’s restaurants, on average, will generate less cash for a second straight year in 2023, further complicating the situation of operators that aren’t financially sound.

Squeezed by higher costs and grumbling at new operating rules, franchisees are joining a meeting this month with the company’s board to press their case in person. The session will give U.S. operators “an opportunity to share with the board of directors why we believe we are on a destructive path,” one group of owners said in an emailed newsletter to about 1,000 members.

Backed by analysts, many of them fear the franchise system is nearing a major crisis, some going so far as to suggest the business model is doomed.

“The CEO is sowing the seeds of our demise. We are a quick-serve fast-food restaurant, not a fast casual like Five Guys or Chipotle,” said one franchisee.

“The system is very lost at the moment,” said another franchisee. “Our menu boards are still bloated, and we are still trying to be too many things to too many people. Things are broken from the franchisee perspective.”

In a financial survey by the Nomura Group, a franchisee stated that the company is in the “throes of a deep depression, and nothing is changing” and exposed that roughly “30 percent of operators are now insolvent”. Another franchisee cited by the FCC report went as far as to speculate that McDonald’s is literally “facing its final days”.

In recent months, Americans have taken to social media to voice their outrage about the McDonald’s prices. They say the chain has become wildly overpriced while quality is deteriorating. For U.S. consumers, some of the biggest draws of eating at fast-food chains are convenience and comfort, but the biggest of them all is certainly affordability. And while McDonald’s customers reckon with higher fast-food bills, the company itself is also in the midst of a reckoning about its future.

The bankruptcies, the closings, and the layoffs demonstrate why analysts believe McDonald’s business model is collapsing.

Article and video cross-posted from Epic Economist.