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A South Carolina Burger King franchisee files for bankruptcy

Capital Restaurant Group, a 24-unit operator, said it hasn’t been allowed to close underperforming locations.
Photograph by Jonathan Maze

A South Carolina Burger King operator that wants to close some of its hurricane-battered restaurants has filed for bankruptcy protection amid an apparent dispute with its franchisor.

Capital Restaurant Group, which operates 24 locations along the state’s coast, filed for Chapter 11 bankruptcy protection late last week after arguing that it has been forced to keep open too many underperforming restaurants.

According to bankruptcy court documents, Capital has seven underperforming restaurants that it would like to close.

Burger King, however, has refused to allow the franchisee to close any underperforming locations, Capital said in its filing. Capital says that it has been “forced” to operate the restaurants at a loss while continuing to pay rent and royalties to Burger King, a subsidiary of Restaurant Brands International.

Capital argues that Burger King would have allowed the company to close the restaurants in conjunction with a sale of its remaining locations. But the franchisee argues that the company “has employed tactics that have delayed the possibility of one or more potential sales.”

Burger King has not yet responded to a request for comment.

This isn’t the first dispute between Capital and Burger King. The franchisee sued Burger King earlier this year over reduced ad spending. In the bankruptcy filing, the franchisee claims that Burger King “reduced advertising in one or more of the markets” in which it operates.

That caused revenues to decline, the franchisee said.

Hurricanes also caused a problem. Many of Capital’s locations are located near Myrtle Beach and Charleston and were hit by hurricanes in recent years, including this past summer. The restaurants had to be closed temporarily, which drained the company of liquidity.

Capital Restaurant Group is a Georgia-based company that has operated the Burger King locations since 2010. The company said that it took over restaurants that “had been neglected for years and in need of repairs, upgrades and improvements.”

The company said in its bankruptcy filing that its deteriorating cash flow and liquidity left it “with no choice” but to seek bankruptcy protection.

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