Dive Brief:

• RRG, a 17-unit Popeyes franchisee based in Georgia, filed for Chapter 11 bankruptcy protections at the end of January, court records from the U.S. Bankruptcy Court for the Southern District of Georgia show.
• RRG “intends to continue the operation of its business during the bankruptcy while eliminating poor performing locations,” the operator said in court documents.
• The Popeyes operator is one of the first multi-unit franchisees to file for bankruptcy in 2024, and the second Popeyes operator to file since last March, when Premier Cajun Kings sought Chapter 11 protections after the death of its owner cast the company into disorder.

Dive Insight:

With cost pressures holding steady in 2024, experts say more franchisees may fall into default this year. Franchisees that borrowed extensively during the pandemic may be at risk of default, given the slippage of margins and traffic relative to 2020 and 2021 and the high cost of money, finance and bankruptcy experts say. In November 2023, three separate multi-unit franchisees of different restaurant companies — Wendy’s, Burger King, and Denny’s — all filed for bankruptcy. The fall of RRG has extended the run of multi-unit franchisee bankruptcies into 2024. 

The failure of three of RRG’s restaurants is the proximate cause for the bankruptcy, court records show. These restaurants lost money and became a burden on the remaining restaurants operated by RRG, which was then unable to meet the lease terms on its remaining restaurants. The company “needs to cure those arrearages to avoid lease termination,” according to court documents. 

RRG’s attorney did not immediately respond to a request for comment on the causes of unprofitability at the three failing stores.

The initial petition claimed RRG has between $1 million and $10 million in liabilities owed to 100-199 creditors. RRG owes outstanding lease rent to at least 11 entities, ranging from $21,442.75 owed to one landlord to $238,595.13 owed to another, according to a list of its largest 20 creditors. The company also has significant debts for inventory.

Last year, Restaurant Brands International, Popeyes parent company, saw a spree of bankruptcies among its American franchisees, including Premier Cajun Kings and several major Burger King operators. Those failures eventually pushed the conglomerate to announce an effort to bring some geographical coherence to its Burger King franchisees as a supplement to its ongoing $400 million branding and restaurant overhaul effort, Reclaim the Flame. RBI did not respond immediately to a request for comment on whether the bankruptcy of RRG and Premier Cajun Kings would necessitate some intervention to support franchisees.