BurgerFi International is facing “significant adverse developments” causing deepening financial losses that could ultimately lead to a bankruptcy filing, the company said in a federal securities filing on Friday.
In the filing, in which it says it cannot timely file its quarterly earnings, BurgerFi said it expects a significantly higher net loss of $18.4 million for the quarter ended July 1, compared with a net loss of $6 million a year ago. The company blamed lower operating income, higher expenses and restructuring costs.
Management is continuing to review the company’s liquidity position, the filing said. But based on the situation and an Emergency Protective Advance Agreement the company entered into with lenders last week, “there is substantial doubt about the company’s ability to continue to operate as a going concern.”
BurgerFi had already disclosed that it had defaulted on its credit agreement. In May, the company said it was exploring strategic alternatives and had entered into a forbearance agreement with lender TREW Capital Management Private Credit, along with private-equity firm L Catterton, who agreed to loan the company another $4 million to support it during the strategic review process.
TREW is led by former Famous Dave’s CEO Jeff Crivello, and his company also acquired the fast-casual Rubio’s chain out of bankruptcy, after acquiring its debt.
In the filing Friday, however, BurgerFi said the forbearance period has expired, so the senior lender could call in the debt, seize or liquidate assets and operations would cease. TREW, however, would likely seize the assets and take over ownership. Without relief from its lender or from sales of assets to meet obligations, BurgerFi could declare bankruptcy, the company said.
BurgerFi has hired advisors to explore strategic alternatives as it works to pay off its debt. That process is ongoing.
For the second quarter, restaurant-level operating expenses climbed to 91% of sales, compared with 86.2% a year ago, which was a 480-basis point increase, according to the filing, which have preliminary results. Those expenses were driven by higher wages and lower sales, and higher prices for chicken wings, the company said.
Restaurant sales decreased about 4%, driven by same-store sales declines at both BurgerFi and Anthony’s, which was in part impacted by the closure of underperforming BurgerFi locations.
BurgerFi closed 14 restaurants in fiscal 2023 and another eight units in the first quarter this year.
The company went public in 2020 through a special purpose acquisition company, or SPAC. But even in the early days, it struggled to stay in compliance with Nasdaq.
The chain brought in turnaround specialist Carl Bachmann, the former CEO of Smashburger, in 2022. He has been attempting a turnaround, working on improvements to BurgerFi’s menu, reopening in New York City, and creating a Better Burger Lab where guests can find limited-edition offerings.
The 102-unit BurgerFi included 27 company-owned and 75 franchised units at the end of the first quarter. Anthony’s has about 60 units, and had just begun franchising last year.
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