Some of the largest franchisees of the second biggest hamburger chain in the US are facing financial difficulties; they borrowed huge amounts of money to accelerate growth, only to see a major sales slowdown.
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Miami-based parent Burger King (BK), owned by UK-based Diageo, has now become involved in ways of keeping them in business. It is not offering cash however, but lining up possible refinancing deals, or engineering takeovers of the small franchisees by the large ones.
John Dasburg, BK chairman and CEO, told the Wall Street Journal that the struggling operations actually “have a lot of leverage and a geographic dispersion of restaurants” that lowers their efficiency.
“We want to enable them to stay in the system long enough to experience a turnaround in sales that will improve their profitability,” he added.
The beleaguered franchisees represent about 1,500 of the firm’s 8,300 outlets in the US. They include BK’s largest franchisee AmeriKing Inc., which operates 374 restaurants but has recently had to default on lending covenants.
The third largest franchisee, the Sydran Group, meanwhile restructured its obligations to give some breathing space to its restaurants, which number over 260.
