Four buyers, including Burger King itself, will pay $33 million to acquire 82 of the 90 restaurants owned by Toms King Holdings, according to court documents filed this week in the franchisee’s Chapter 11 bankruptcy filing.
The largest number of restaurants are slated to go to a company called DC Burger, which is buying 37 of the Burger King locations in Virginia for $22 million, according to court documents.
DC Burger is owned by Dough Capital, which in turn is owned by Kuljeet and Jessica Singh, who are slated to be first-time Burger King franchisees. The Singhs are not strangers to the restaurant business. They own 80 of Round Table Pizza’s locations in Northern California, Oregon and Washington, according to court filings.
Another buyer is Karali Group, which has agreed to pay $7.6 million for 27 restaurants, most of which are in Cleveland, Youngstown and Dayton, Ohio, along with two in Pittsburgh. Karali Group is not an unfamiliar name in the Burger King world, having operated the chain’s restaurants in the U.K.
The franchisor, meanwhile, agreed to pay $3.2 million to acquire 17 restaurants, most of which are in Illinois and Dayton, along with one each in Cleveland and Pittsburgh. Another restaurant in Pittsburgh is being sold to Restaurant Concepts for $120,000, according to court documents.
The bankruptcy court has yet to approve the sale.
The $33 million price tag is less than the $35.5 million in secured debt Toms King had when it declared bankruptcy in January. It represents an average of $400,000 per sold restaurant, not including eight locations that were either not sold or were closed since the filing.
Based on last year’s Burger King average store-level EBITDA, or earnings before interest, taxes, depreciation and amortization, of $140,000, the valuation multiple would be just under 3x. The actual multiple is likely much higher, based on the company’s financial challenges.
The bankruptcy filing is one of two in the Burger King system, including a more recent filing by the Utah-based Meridian Restaurants Unlimited. In addition, the Texas-based EYM King closed 26 locations in Michigan after Burger King sued the franchisee over unpaid royalties.
Burger King has struggled for years with weak sales and weak operator profits. Profitability worsened last year as inflation hit many restaurants. The company is working to improve sales and profitability, but many operators continue to struggle, prompting bankruptcy filings.
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