Popeyes Chicken is the latest among many businesses that own many franchises and are struggling. It suffered from inflation, declining customer figures, and growing expenses. Are Popeyes closing stores in 2024?
In February 2024, RRG Inc., a franchisee that operates 17 Popeyes locations, filed for bankruptcy in Georgia. But the leading Popeyes firm remains intact.
Mark and Jane Rinna, the franchisee owners, revealed that they want to close three Popeyes locations that need to be fixed in an effort to save the more promising ones. However, only some of the information is officially known.
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Popeyes franchisee files for bankruptcy
Popeyes is one of the nation’s most popular fried chicken chains. Premier Cajun Kings, a 30-unit Popeyes franchise based in Alabama, declared bankruptcy in late January. It comes after its founder’s sudden death last year. This scenario and a challenging operating environment left the company in turmoil.
Patrick Sidhu, a Burger King franchisee in Alabama, began adding Popeyes restaurants in 2018 and 2019. According to court filings filed in February, his company earned more than $30 million in sales in 2020 and 2021.
But Sidhu passed away in May of last year. According to a court document, he was the sole manager in day-to-day operations. His death also “triggered great operational uncertainty” for the company’s existing locations. Meanwhile, rising food and labor expenses, as well as a shortage of staff, made profitability hard.
Due to poor performance and operating losses, the company closed ten outlets in Alabama and Tennessee to stabilize its operations. The landlord evicted the 11th store, leaving the business with 19 active outlets.
However, the efforts were insufficient to avoid collapse. So, the Premier Cajun Kings filed for Chapter 11 bankruptcy protection. The business owes $8.2 million in secured debt.
Premier Cajun intends to sell its restaurants in bankruptcy. It has also reached an arrangement with Popeyes under which a buyer will enter into a new franchise agreement with the business.
This is the fifth bankruptcy filing by a restaurant company in recent months. It follows the filings of Bertucci’s Corner Bakery and two franchisees from Popeyes’ sister business, Burger King. Rising labor has reduced most restaurant firms’ profit margins.
Food costs are linked to utility, construction, and equipment purchases. As a result, bankruptcy filings have increased significantly this year.
What went wrong with the Popeyes franchisee?
Prior to the deaths of its founders, Premier Cajun Kings earned more than $30 million in sales in 2020 and 2021 and employed about 500 workers. Sidhu started his firm in 2018 with businesses in Birmingham, Alabama. According to a court document, Sidhu opened 24 new restaurants in Alabama, Georgia, and Tennessee between 2018 and 2019.
As of March 2023, the company employs 398 workers after closing ten stores in Alabama and Tennessee the previous year. This was to avoid further losses and help steady the business.
In addition to Sidhu’s death, the company faced several obstacles due to the COVID-19 pandemic. This includes high inflation, borrowing rates, and a labor shortage.
However, closing ten locations did not prevent PCK’s insolvency. In 2022, the business reported $26 million in sales and $6.8 million in net operational losses. As of March 2023, the company has about $10 million in assets and $20.1 million in liabilities.
As mentioned, PCK aims to keep operating its restaurants throughout its Chapter 11 case. But it is also looking to sell off its assets. The company signed a franchisee agreement with franchisor Popeyes. It has the idea that any future buyer must enter into a new franchise agreement.
Franchise Default Alert 2024
Experts predict that more franchisees will fail this year if cost pressures remain constant in 2024. Franchisees that borrowed heavily during the epidemic may be at risk of default. This is according to finance and bankruptcy specialists. The reason behind this is the margin and traffic slippage in 2020 and 2021, as well as the high cost of money.
Three separate multi-unit franchisees from different restaurant firms filed for bankruptcy in November 2023: Wendy’s, Burger King, and Denny’s. The failure of RRG has extended the term of multi-unit franchisee bankruptcy to 2024.
According to court papers, the bankruptcy was primarily caused by the failure of three of RRG’s restaurants. These restaurants lost money and put a burden on RRG’s existing restaurants. Thus leaving the company unable to meet lease requirements for its remaining restaurants. The business “needs to fix those arrearages to avoid lease termination,” according to court filings.
RRG’s counsel needed to respond to a request for comment on the reasons for the three failing outlets’ unprofitability.
According to the initial petition, RRG has between $1 million and $10 million in liabilities payable to 100–199 creditors. RRG owes lease rent to at least 11 companies. It ranges from $21,442.75 to one landlord to $238,595.13 to another. This data is according to a list of its top 20 creditors. The business also has large inventory debts.
Last year, Popeyes’ parent company experienced a wave of bankruptcy filings among its American franchisees. At some point, the company’s failings forced it to launch Reclaim the Flame, a $400 million branding and restaurant renovation initiative. This is in addition to an effort to provide some geographic coherence to its Burger King franchisees.
Popeyes stays quiet as locations close
Several Popeyes restaurants in Central Georgia have dark windows and empty parking lots. Previously, it was filled with eager customers looking for their signature fried chicken.
The majority of Popeyes Louisiana Kitchen’s locations in Central Georgia have closed. The store’s doors have notices stating that the closures are for maintenance.
Therefore, our chances of getting chicken with a Louisiana touch could be higher. According to Google Maps, more than ten locations are temporarily shuttered. Closures have also occurred in several Central Georgian locations, from Byron to Forsyth to Macon.
According to the Popeyes shop locator, the only Popeyes restaurant in Central Georgia is at Robins Air Force Base. But it is not open to the public. Signs at locations in Warner Robins and Macon both read, “We’re down for maintenance.”
According to two regulars at the Macon site on Northside Drive, the signs were put up last week. They claimed that although their lunch spot was rather popular, many customers have moved to the wing place next door since it is closed.
We are still trying to understand why they are closed and whether or not they will reopen. Reporters contacted Popeyes and the Atlanta legal firm that helped with the earlier this year acquisition of the Central Georgia sites. They have yet to receive a response.
Conclusion
Many businesses have been closing stores lately. Thus, they are restructuring by shutting down unprofitable restaurants so they can focus on the successful ones.
Popeyes is currently developing new equipment, updated layouts, simplified operations, and upgraded technology to provide easy-to-run kitchens. The large fast-food chain is shifting from smaller test clusters to larger ones.
The business hopes to boost franchise profitability to $300,000 per unit by 2025. Its revenue increased by 17% from the previous year to $245,000 this past year.
As of December 31, Popeyes had 3,051 locations in the United States. In 2023, it saw any RBI chain’s most net unit growth. There are other bankruptcies besides the RBI. Large franchisees of Hardee’s, Denny’s, and Wendy’s filed for bankruptcy protection last year.
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