A large Burger King franchisee is seeking to reject almost half the leases for its 90 restaurants as part of a Chapter 11 bankruptcy proceeding.
Toms King, which is headquartered in Palatine, Illinois, filed the bankruptcy petition and request regarding its leases this week in U.S. Bankruptcy Court, for the Northern District of Ohio, Eastern Division, in Akron. The majority of the company's portfolio of the fast-food eateries are in Illinois, Ohio, Pennsylvania and Virginia.
In court documents, Toms King said it has been unable to meet its debt-service obligations because it is still reeling from the fallout from the pandemic, as well as headwinds such as inflation, forcing it to seek bankruptcy protection.
Toms King is looking for court approval to reject 43 unexpired leases for Burger King sites in Illinois, Virginia, Ohio, Pennsylvania, as well as a location in North Carolina. In court documents, Toms King said the restaurants on that list have been identified as underperforming and that it has ceased operations at, and vacated, those sites.
The company said it still has property left at some of those locations, such as furniture, fixtures and equipment. Toms King is seeking court approval to "abandon" or leave those items at those former Burger King sites "because it is prohibitively expensive or difficult to remove, relative to its value."
The company outlined its financial woes in court filings.
"Over the past several years, and particularly as a result of the COVID-19 pandemic, the debtors’ business suffered significantly from loss of foot traffic, resulting in declining revenue without proportionate decreases in rental obligations, debt service and other liabilities," Daniel Dooley, chief restructuring officer for Toms King, said in an affidavit.
"Recent increases in costs of shipping and food, decreased availability of labor and inflation generally have exacerbated the debtors’ cash flow issues," Dooley said. "As a result, although certain of the restaurants have remained profitable, others have been operating at a loss, resulting in the debtors’ inability to meet their obligations."
In November, Toms King named R.J. Dourney, the former CEO of the bakery-cafe chain Cosi, as an independent manager.