Major fast food franchisee files for Chapter 11…

Major fast food franchisee files for Chapter 11 bankruptcy

It's been a rocky road for many fast food and fast casual operators of late.

Take, for example, the ongoing Red Lobster fiasco.

The dine-in seafood restaurant, which operates about 700 restaurant locations nationwide, is no stranger to running deals to attract customers. Its popular cheddar biscuits boast a cult following, and the restaurant is regularly hawking some kind of limited-time deal for seafood or entrees in an effort to boost foot traffic and excitement.

In 2023, however, Red Lobster may have gone too promotion-happy, offering an unlimited shrimp deal, which resulted in something of a stampede and the ultimate downfall of the restaurant entirely.

The now-notorious Ultimate Endless Shrimp promotion allowed guests to order different types of unlimited shrimp dishes, like Garlic Shrimp Scampi or Shrimp Linguini Alfredo, for just $20. After seeing unprecedented demand, the restaurant hiked the price to $22, and later to $25.

But the damage was irrevocably done, resulting in an approximately $11 million in operating loss for Q3 2023.

“We knew the price was cheap, but the idea was to bring more traffic in the restaurants,” Thai Union CFO Ludovic Regis Henri Garnier said in the Q3 earnings call. “So we wanted to boost our traffic, and it didn't work."

The restaurant filed for Chapter 11 bankruptcy in Florida and has since closed 100 locations.

A Subway sandwich, soft drink, and chocolate chip cookies.
Gerardo Mora/Getty Images

Restaurants have been struggling

Red Lobster isn't the only restaurant to encounter difficulties over the last couple of years.

Foxtrot and Dom's Kitchen, upscale bodegas popular in cities like Chicago and Washington, D.C. faced similar challenges over the last year. The operator shuttered permanently – and abruptly – earlier this spring, claiming that staying open had reached an untenable point.

"It is with a heavy heart that we must inform you of a difficult decision we have had to make," the company wrote April 23, adding that "This decision has not been made lightly."

"We understand that this news may come as a shock, and we apologize for any inconvenience it may cause. We genuinely appreciate your understanding during this challenging time," the company wrote.

Other chains, including Tijuana Flats, Rubio's Coastal Grill, Sticky Fingers, and Ink Coffee have filed for Chapter 11 bankruptcy in recent months after struggling to stay afloat.

Major sandwich franchisee files for bankruptcy

And now, River Sub, a franchisee that operates just under 50 Subway locations, has filed for Chapter 11 bankruptcy protection after finding itself embroiled in legal troubles.

More bankruptcy:

The San Antonio, Texas based operator lost an ongoing legal battle in a wrongful death suit involving a former store manager, Marisela Cadena, who was shot and killed at a Subway store in 2020 by her former boyfriend. River Sub was ordered to pay $2.97 million for refusing to allow Cadena to transfer stores or offer her adequate safety measures and protection against the known threat.

The lawsuit, paired with the difficulties the Covid pandemic presented the fast food operator, proved to be too much of a financial burden and the franchisee filed for Chapter 11 on June 20 in Texas.

At its height, River Sub operated 69 locations in 2012, but rapidly saw its finances deteriorate in recent years. It blamed Covid for an 80% decline in sales, putting gross sales at about $30 million in 2023. It did not cite a specific reason for the Chapter 11 filing, and it currently employs about 454 people.

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