A fast food franchise used to seem like a license to print money.
It was hard not to be successful when you had a national brand behind you handling advertising, marketing and menu development.
That changed during the Covid pandemic. Chains like McDonald's that invested heavily in technology prospered during that period, while companies that didn't struggled.
Related: Major fast food franchisee files for Chapter 11 bankruptcy
Forced to close their dining rooms, many chains struggled to shift to a drive-thru, takeout and delivery model. That led to a much bigger divide between winners and losers in the fast food space.
Even when the pandemic ended, higher food costs, rising labor rates and changing eating habits were a drag on fast-food chains. Burger King saw several franchisees file for bankruptcy and nearly 400 restaurants close. Subway recently lost a franchisee to 48 locations, and other chains have also seen franchise owners file for bankruptcy.
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Pressures have not eased even as inflation has stabilized. Some markets have adopted a minimum wage of $15 an hour (California hit $20), while consumers have forced chains like McDonald's and Starbucks to add new value offerings to their menus.
It's a challenging market and it has forced another major fast food franchisee to file for Chapter 11 bankruptcy.
Image source: Chen Jianli/Xinhua via Getty
Arby's franchise needs more than meat
Miracle Restaurant Group purchased 45 Arby's locations in 2005. The company has a clear mission statement on its website.
“Our purpose and business objectives require us to be flexible,” the company said. “Since our formation in 2005, we have built new restaurants and opened new markets, pursued other restaurant concepts to complement our Arby's business, and faced the harsh realities of the 2009 recession with courage and perseverance.”
Miracle Restaurant Group doesn't mention its Chapter 11 bankruptcy filing on its website, but it says it hasn't always been on an easy path.
“We have faced difficult decisions and have not shied away from making decisions that we believed were best for our calling. Our hope for the future is firm and our commitment is unwavering,” he added.
The website also sets out its business philosophy:
“Our company seeks to be successful in our businesses and in our communities. We are proud to be able to offer our employees opportunities in the important business of hospitality. We seek to increase our sales and earn a return on our work that allows us to pay our bills and have enough money to reinvest in growth and profits for our owners.”
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Longtime Arby's Franchisee Files for Chapter 11 Bankruptcy
The future of Miracle Restaurant Group is in doubt following its June 20 Chapter 11 bankruptcy filing. Having reduced from 45 locations to 25, the company operates Arby's locations in Illinois, Indiana, Texas, Mississippi and Louisiana.
This is the second Chapter 11 filing for the company, according to the June 20 filing with the U.S. Bankruptcy Court for the Eastern District of Louisiana.
“In 2010, the debtor operated over 60 stores and filed for Chapter 11 relief in this Court. A plan was confirmed and, pursuant to the Plan, several stores were closed. The plan was consummated and all creditors were paid in full under the plan,” the filing said.
Miracle Restaurant Group attributed the filing to “inflationary pressures on both commodity and labor expenses that price increases were unable to offset. This resulted in a significant erosion in variable cash earned from operations to cover fixed costs.” rent and debt service.
The company said its latest round of problems began during the Covid pandemic.
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The filing also cited falling sales in 2023 and the first half of 2024.
“Negative same-store sales and lower-than-anticipated sales at newer stores have resulted in certain stores operating with extremely low or (at times) negative cash flow on a weekly and monthly basis,” the company said.
Miracle Restaurant Group has asked its owners and Arby's for help, but did not receive responses in time to avoid filing for Chapter 11 bankruptcy.
The company has between 200 and 999 estimated creditors, between $1 million and $10 million in assets and between $1 million and $10 million in liabilities.
Miracle Restaurant Group has 31 full-time and 291 part-time workers.