Signs BurgerFi Might Not Be Around Much Longer

It's a tough time to run a fast-food restaurant. According to Ipsos Consumer Tracker, over a third of Americans are eating at fast food chains less in 2024 than they did in the past. As the cost of living soars, customers are instead choosing to spend their money elsewhere. Or, when they are spending their money on fast food, they're far more selective about where they'll spend it. Unsurprisingly, multiple chains are feeling the pinch — BurgerFi included.

First founded in Fort Lauderdale, Florida, in 2011, the chain sits alongside the likes of Shake Shack and In-n-Out in the "better burger" department (via Technomic), a corner of the market reserved for what we like to consider fancy fast food. While price tags are higher than the likes of McDonald's or Burger King, BurgerFi's comparably high quality is visible in the absence of additives, steroids, hormones, and antibiotics in its Angus beef, fresh, hand-chopped vegetables, and never-frozen potatoes. But this attention to detail hasn't necessarily translated to a flourishing business. From restaurant closures to its ever-changing menu, it's no secret that the fast food chain has struggled recently. The following red flags have us concerned that the end is nigh for BurgerFi.

The downhill slope for most restaurant chains typically begins with dwindling store numbers. Multiple chains axed restaurants en masse in 2024, including the likes of TGI Fridays, Hooters, and Denny's. While BurgerFi opened a new flagship store in New York in 2024, it wasn't totally immune to these losses. The chain shuttered eight restaurants nationwide — six franchised locations and two corporate — in the first quarter alone.

These closures have included BurgerFi's restaurant in Tuscaloosa, Alabama, plus its Gainesville, Harbourside, and Delray Beach locations in Florida. The latter had become infamous prior to its closure, as it was the scene of an attempted murder-suicide by a Republican activist in the restaurant's parking lot in October 2023.

As per CEO Carl Bachmann, the closures came as a part of BurgerFi's effort to refine its portfolio. "We continued to evaluate our portfolio with a close look on cash flow and profitability," he clarified in BurgerFi's earnings call in May 2024 (via Investing.com). However, it seems like this evaluation started much earlier than early 2024. Even more restaurants closed in 2023. While eight new stores debuted in the fiscal year, a whopping 14 underperforming stores (five of which were franchised) closed in that same timeframe. Another 15 restaurants shut their doors for good in 2022, while 17 disappeared in 2021.

Sales aren't looking too hot for BurgerFi right now, either. In the same earnings call where CEO Carl Bachmann confirmed the closure of eight BurgerFi restaurants, it was also revealed that same-store sales had plummeted by 13%. Bachmann pinned this sharp decline on poor weather (an excuse shared by other fast food chains such as KFC and McDonald's when explaining their own flailing sales in early 2024).

This would be easier to accept if this wasn't the latest in a long line of calls reporting similar disappointments. Back in 2023, BurgerFi reported an 8% drop in sales. The previous year, sales dropped by 9%. It's a concerning trend for the burger chain, which Bachmann also noted is currently trying its best to contend with "a challenging consumer environment" (via Restaurant Dive). However, Bachmann also claimed that the chain is showing signs of turnaround — thanks in no small part to a new inventory and labor management system — which will apparently become evident in the second half of 2024. Emphasis on "apparently."

With stores closing and sales falling, it should come as no surprise that BurgerFi's share prices are falling — and with major consequences. The chain went public in December 2020, but in January 2024, it was revealed that the stock market index Nasdaq had issued BurgerFi with a delisting notice due to the fact that it no longer met the minimum stock price requirement of $1 per share. The company had just closed out the week at 67 cents per share and hadn't managed to hit a share price over $1 since the beginning of December.

As a result of this notice, BurgerFi was given a tight deadline of six months to comply with Nasdaq requirements by maintaining a stock price of $1 or more for at least 10 days in a row. However, in September 2024, it received yet another delisting notice. This time, it received the warning because it hadn't filed its second-quarter report on time, and its board of directors didn't have enough members (more on that in a bit). Should BurgerFi be delisted, its shares would no longer be available on the stock exchange, meaning they are instead traded over-the-counter — a surefire sign of a company with ailing finances.

Soaring operating costs aren't a problem exclusive to BurgerFi. A survey from Restaurant365 found that over 80% of restaurants experienced an increase in food costs in 2023, while 89% said that their labor costs had also surged. As per Vine Pair, some restaurants are even spending as much as 60% of their gross sales on labor in 2024, compared to the standard of 30 to 35% in 2019.

When it comes to BurgerFi, the chain has made no secret of the fact that it's struggling with the increase in labor costs. In an SEC filing (a kind of financial statement filed with the U.S. Securities and Exchange Commission) in August 2024, it complained that its operating expenses had primarily increased due to higher staff wages. BurgerFi also cited skyrocketing chicken wing prices as another factor, claiming that the average price had jumped by $1.70 compared to July 2023. Combined with lower sales, this isn't exactly a recipe for financial success.

If sales are low and operating costs are high, that doesn't leave much money to spare when the creditors come knocking. In April 2024, BurgerFi officially defaulted on its credit agreement with TREW Capital Management. A statement from the chain confirmed that it was no longer in compliance with its $51.3 million loan and that it was in talks with its lender.

Four months later, however, it was reported that its forbearance period (in which borrowers can temporarily pause their repayment) had come to an end. This left TREW Capital Management — which acquired the company's debt and loaned it $2 million in June — in a position to demand immediate repayment or take control of BurgerFi's assets if it so pleased.

A year earlier, a BurgerFi restaurant in Lexington, Kentucky was served an eviction notice after failing to pay both its rent and state taxes. Its unpaid debt tallied up to $22,517 in unpaid property taxes for 2022, plus $22,000 for its rent in January, February, and March of 2023. While BurgerFi clarified that this was a franchised location, this still wasn't a great look for the burger chain. It also doesn't paint the most promising picture for each individual restaurant's sales.

Since its inception, BurgerFi has angled itself as a premium fast food restaurant. It may dole out burgers and fries like the rest of them, but the USP is that they're made with better ingredients than its competitors and that everything is powered by "an uncompromising standard for flavor and quality" (via BurgerFi). Sure, you may blanch at the prices on the menu, but the upside is that you're paying for quality you'll struggle to find elsewhere.

The thing is, this concept only really works if you're actually serving up "quality" food. In recent years, however, some customers have felt like BurgerFi has lost its sparkle. "Used to be a great place 4 years ago, but now I am boycotting them due to a terrible experience there," said one Reddit user. "I got the breakfast burger and apparently they were out of hash browns so they put raw fries on it. I asked for a manager and showed them the raw fries they put on the burger and he responded with 'just pick them off then.'"

While the frozen custard is still hailed as a highlight, customers have accused it of serving soggy fries and dry burgers. In response to the revelation of the chain's struggles, another user noted that "it certainly doesn't help that they charge a goddamn arm and a leg for mediocre burgers." Or, as one user put it, "They priced themselves out of business."

When BurgerFi launched, it was all about burgers and fries. That changed in late 2023 when the chain decided to enter new territory — chicken territory, to be precise. BurgerFi added three flavors of jumbo chicken wings (Original, Memphis Sweet BBQ, and Frank's RedHot Buffalo) to the menu of all restaurants. Its CEO, Carl Bachmann, raved about the changes in a press release. "Our chef-crafted and sensationally indulgent menu strategy makes our new chicken wings the perfect side to accompany our 100% all-natural Angus beef burgers," he said. "America loves burgers, wings, and beer. And now you can get them all at BurgerFi." 

A few months later, BurgerFi also expanded into fried and grilled chicken sandwiches. As per Bachmann, these chicken ventures formed part of a carefully calculated strategy intended to boost business growth. "A fast-casual burger brand should have a 10% to 15% chicken mix. And, until now, we had virtually none," Bachmann said (via Restaurant Business Online). The chain also took a closer look at other gaps or flaws in its menu and set about providing other solutions, such as switching up its frying techniques to produce crispier fries (something customers had reportedly requested for a while), ditching labor-heavy items, and introducing salad bowls. These are all admirable efforts from a brand trying to regain ground in the fast food wars, but not overly indicative of a business confident — or successful — in its product.

In November 2021, BurgerFi (or rather, BurgerFi's parent company, BurgerFi International Inc.) made a big announcement: it had purchased a second restaurant chain, Anthony's Coal Fired Pizza & Wings, for $156.6 million. Founded and headquartered in Florida, Anthony's was founded by Long Island transplant Anthony Bruno in 2002 after he struggled to find decent pizza in the Sunshine State.

Pizza is still Anthony's specialty to this day, with the chain named "The Best Pizza Chain in America" by USA Today's Great American Bites, but it now also offers pasta, sandwiches, and surprisingly delicious chicken wings. Like BurgerFi, however, it's struggled in recent years, with its only stores in Rhode Island and Maryland shuttering in September 2024. Investors have also voiced their discontent with the brand's acquisition, with some suing BurgerFi in April 2023 over claims that they were misled about its profitability.

With BurgerFi's stock plummeting by over 10% in the wake of purchasing Anthony's, one New York investor filed a class action complaint. This alleged that BurgerFi "overstated the effectiveness of its acquisition and growth strategies" and "misrepresented to investors the purported benefits of Anthony's acquisition" (via WPTV), to which BurgerFi insisted that the lawsuit's claims were entirely without merit.

The team behind BurgerFi has changed dramatically in the past few years. The biggest shift happened in May 2023 when its Chief Executive Officer, Ian H. Baines, announced his retirement. Instead of taking any kind of severance, it was revealed that he would stick around for another 12 months as a consultant, with Carl J. Bachmann — who'd previously overseen massive growth at rival chain Smashburger — unveiled as his replacement. 

Later that year, celebrity chef Martha Stewart quietly stepped down from BurgerFi's board of directors. She'd previously taken the job in 2021 and served as head of the board's Product and Innovation Committee, serving as a major voice in the launch of its vegan burger. Other directors started dropping like flies not long after. Four people resigned within two weeks in late August and early September 2024, including Andrew Taub, managing director of the private equity firm that sold Anthony's Coal Fired Pizza & Wings to BurgerFi. 

Admittedly, yes, people leave all kinds of jobs every day. What makes this significant is the fact that so many people, so high up in the company, cut ties in such a short period of time. We're all for feeling optimistic, but it's tough to ignore the red flags here — especially combined with the fact that the departures coincided with the hiring of Jeremy Rosenthal as BurgerFi's first Chief Restructuring Officer.

From Shake Shack to Subway, all the big fast food powerhouses have an international presence. In 2016, BurgerFi announced plans to join this elite group with a newly signed partnership with franchise group Ground Round Limited. The plan was to open 10 BurgerFi restaurants in the U.K., starting with a flagship store in London's Wembley Central Square, and grow it as a major presence on the country's fast food scene. By all accounts, the move came with an abundance of optimism. "Our next goal to open 100 restaurants is in sight, and adding a location in London is a significant milestone for the BurgerFi brand," said Corey Winograd, BurgerFi's then-Chief Executive Officer, in a press release at the time.

But in retrospect, that optimism may have been misplaced. While this Wembley Central Square restaurant did indeed open — as did a second in London's Russell Square — BurgerFi's British expansion ended there. Both restaurants closed their doors for good in 2018, with radio silence from BurgerFi on its future goals for the U.K. Other international expansions met similarly bleak fates. A BurgerFi restaurant opened, then closed, in Panama, while a 2016 multi-unit deal in Kuwait also fizzled away into nothing after the first store opened in 2017. Nowadays, you'll only find BurgerFi restaurants (or what's left of its dwindling lineup) in the good ol' U.S.

If you needed just one sign to convince you that BurgerFi won't be around much longer, this is it. After reporting a net loss of $18.4 million for the second quarter of 2024, the chain revealed in August that it may have no choice but to file for bankruptcy. A filing with the Securities and Exchange Commission claimed that BurgerFi had just $4.4 million of cash on hand and that "if the Company does not receive adequate relief from its senior lender and additional sufficient liquidity from potential liquidity providers or from sales of the Company's assets to meet its current obligations, it may seek protection under applicable bankruptcy laws."

It's safe to say that this "adequate relief" never arrived, as on September 11, 2024, BurgerFi officially declared Chapter 11 bankruptcy. The fast food chain's filings detailed between $50 million and $100 million in assets and somewhere between $100 million and $500 million in debt. While BurgerFi insisted that its restaurants (Anthony's Coal Fired Pizza & Wings locations included) would continue to operate as usual, it admitted that it had struggled to overcome the post-pandemic challenges currently haunting the food industry. But it's not totally given up hope yet. "We are confident that this process will allow us to protect and grow our brands and to continue the operational turnaround started less than 12 months ago," said its Chief Restructuring Officer, Jeremy Rosenthal, in a press release. Watch this space.