When a company runs out of money it has to. make sacrifices. For a retailer, that could mean cutting inventory, operating with fewer workers, and pushing off paying bills.
In the restaurant world, however, it’s harder to cut expenses. A burger chain can’t suddenly stop selling fries to save money and cutting back on workers will quickly lead to customers having a bad experience.
Related: Popular fast-food chain surprisingly closing multiple restaurants
A struggling fast-food chain that has run low on cash has very few options. It can cut back on back office expenses, but for a public company, that creates a whole new set of problems. The SEC does not take kindly to companies missing filing deadlines.
It’s also unforgiving when a public company falls out of compliance with its rules and has very little leeway before the company gets delisted.
For BurgerFi International (BFI) , its Nasdaq compliance woes simply compound its problems as the company has already defaulted on loans from a lender that would like to take the brand over.
It’s a bad situation that just got worse, and the company, which warned on August 20 that it was considering a bankruptcy filing, appears much closer to being forced to file for Chapter 11 bankruptcy protection.
BurgerFi has already defaulted on
Image source: Pixabay.
BurgerFi faces Nasdaq delisting
BurgerFi operates its namesake brand as well as Anthony’s Coal Fired Pizza and Wings. It currently has 102 franchised and corporate-owned BurgerFi locations, and 59 corporate-owned and one franchised Anthony’s Coal Fired locations.
The company has received deficiency notices from the Nasdaq stock exchange related to its failure to timely file its Quarterly Report on Form 10-Q for the quarter ended July 1, 2024, and the composition of Board committees arising from the resignation of directors.
“On August 27, 2024, Nasdaq provided formal notice to the company that as a result of the company’s failure to timely file its Q2 Form 10-Q, the company does not comply with the continued listing requirements under the timely filing criteria outlined in Nasdaq Listing Rule 5250(c)(1). Also on August 27, 2024, Nasdaq provided formal notice to the Company that as a result of the resignations of certain members of the company’s Board of Directors, the company does not comply with Nasdaq’s audit committee and compensation committee requirements set forth in Nasdaq Listing Rule 5605,” according to a BurgerFi press release.
BurgerFi has 60 days to file its missing forms and 45 days to submit a plan to fix its board of directors to comply with Nasdaq’a audit committee and compensation committee requirements.
If the company does not meet those requirements, it will be delisted from the stock exchange.
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BurgerFi faces Chapter 11 bankruptcy
In May, BurgerFi management shared that it had formed a special committee of Directors and retained Kroll Securities, LLC as its exclusive financial advisor to support an ongoing evaluation of strategic alternatives.
At the time, it warned that its actions may not result in a solution that allowed the company to continue operating under its current management.
“We are committed to considering all potential strategic alternatives. While we are confident in the Company’s current operating strategy, we are mindful of the company’s current liquidity challenges and are committed to exploring strategic alternatives that we believe would be in the best interests of the company and its stakeholders,” said David Heidecorn, a member of the Board of Directors.
At the time, the company also entered into a forbearance agreement for its credit line with TREW Capital.
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“TREW focuses on distressed legendary brands, and brands with a proven business model, but require additional resources for growth,” according to its website.
Basically, TREW loans struggling restaurant brands money and takes them over if they can’t fix their operations on their own.
BurgerFi has already warned that there is substantial doubt about the company’s ability to continue operating as a going concern.
A Chapter 11 bankruptcy filing would put TREW in a strong position to take over the company.
