Fast-food restaurant chains face several challenges to overcome and stay in business.
Competition among chains, whether they are burger, pizza, or chicken restaurants, has been fierce for decades. The Covid-19 pandemic in 2020 brought new challenges as restaurants needed to adjust to a new business model, often closing their dining rooms and transitioning to all-take-out, drive-thru, and delivery services they may not have previously offered.
Don't miss the move: Subscribe to TheStreet's free daily newsletter
As restaurant companies and their franchisees recovered from the difficulties of the pandemic, they faced a new set of challenges with rising inflation, high interest rates, higher labor costs, and changing consumer preferences.
Related: Bankrupt pizza chain operator unloads dozens of restaurants
These new challenges have led restaurant chains to file for bankruptcy protection to reorganize their debts to continue operating. On some occasions, restaurant owners have been forced to close locations to cut losses.
Fast-food franchise restaurant operator EYM Group operates Burger King, Denny's, Pizza Hut, Panera Bread, and Kentucky Fried Chicken franchises in seven states, including Florida, Georgia, Illinois, Indiana, South Carolina, Texas and Wisconsin.
The company's EYM Pizza affiliate filed for Chapter 11 protection in July related to a lawsuit Yum Brands (YUM) filed against the franchisee about its Pizza Hut royalty payments.
While it's unclear if the bankruptcy filing and lawsuit are affecting the company's EYM Chicken affiliate, the company has reportedly closed 25 of its 47 KFC locations.
RRG Inc., a Popeyes franchise operator of 17 Georgia locations, in February 2024 filed for Chapter 11 bankruptcy as three failing locations were driving down all the operator's other restaurants.
Related: Bankruptcy filing can’t rescue popular retail food brand
"Debtor is filing bankruptcy as a result of failing locations," the debtor wrote in its bankruptcy filing. "Debtor has approximately three Popeye’s restaurants that have significantly lost money and caused a financial burden on the continued operation of the remaining restaurants. Debtor has fallen behind on lease payments of remaining profitable restaurants and needs to cure those arrearages to avoid lease termination."
And now, a legendary fried chicken restaurant chain dating back to the 1950s is facing a Chapter 11 bankruptcy filing.
Iconic fast-food chain franchise operator Original Harold's Chicken of Nevada on Oct. 4 filed for Chapter 11 bankruptcy seeking to reorganize its business.
More bankruptcy stories:
- Big Lots retail chain ready to file Chapter 11 bankruptcy
- Popular retail product maker files for Chapter 11 bankruptcy
- Mattress Firm rival files for Chapter 11 bankruptcy
The company, which operates Original Harold's Chicken locations in North Las Vegas and Henderson, Nev., listed $40,000 in debts, but no assets in its petition. The debtor did not indicate a specific reason for filing bankruptcy.
The fast-food chicken franchise indicated that no funds would be available for distribution to unsecured creditors after administrative expenses are paid.
The Original Harold's Chicken restaurant chain, established in Chicago in 1950, operates 46 locations in eight states, including Arizona, California, Georgia, Illinois, Indiana, Missouri, Nevada and Texas.
Founder Harold Pierce launched his first restaurant in an African-American neighborhood in Chicago on 39th Street out of necessity. Larger fast-food chains avoided such neighborhoods, and legal and social obstacles in the 1950s prevented Black-owned businesses from locating in Chicago's downtown or North Side, according to Original Harold's website.
Pierce's restaurant chain would soon become one of the few examples of a successful Black-owned fast-food chain that primarily served the Black community. Almost 75 years later, Harold's now has 13 locations throughout Chicago and 46 units across the nation.
The Chicago-based fast-food chain had other difficulties with its restaurant locations recently. A location on East 47th Street in the Windy City in June 2024 was closed by the Illinois Department of Revenue for undisclosed tax reasons.
Harold's Chicken on 87th Street in Chicago closed permanently in July 2020 when it failed to negotiate a new lease after the landlord raised the rent by 40%.
Related: Veteran fund manager sees world of pain coming for stocks
