1851

Two major QSR (quick-service restaurant) franchisees filed for Chapter 11 bankruptcy last week.&nbsp;River Sub, a&nbsp;<a href="https://1851franchise.com/franchise-deep-dive-subway-franchise-costs-fees-profit-and-data-2722471">Subway</a> franchisee operating 48 stores in Texas,&nbsp;<a href="https://www.franchisetimes.com/franchise_legal/bankruptcy-for-48-unit-subway-franchisee-comes-amid-wrongful-death-suit/article_73ca56a4-3307-11ef-8add-3f0457d1333a.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=two-big-brand-multi-unit-qsr-franchisees-declare-bankruptcy-on-the-same-day-2726574" target="_blank" rel="nofollow">filed for Chapter 11 bankruptcy on June 20</a> following the denial of an appeal to vacate a nearly $3 million wrongful death award. The award was granted after Marisela Cadena, a manager at River Sub, was murdered by her ex-boyfriend in 2021. The company had allegedly failed to transfer her or take further security measures following a kidnapping incident involving the same individual.The substantial liability from this case, combined with a&nbsp;<a href="https://1851franchise.com/where-did-subway-go-wrong-2721389">significant drop in sales</a> due to the COVID-19 pandemic, precipitated River Sub's financial crisis. At its peak, River Sub operated 69 stores, but sales plummeted by 80% during the pandemic, with the remaining stores generating about $30 million last year. The franchisee employs approximately 454 people but owes Cadena’s survivors nearly $3 million, vastly overshadowing its next largest creditor at $78,000.Miracle Restaurant Group, a 25-unit&nbsp;<a href="https://1851franchise.com/franchise-deep-dive-arbys-franchise-costs-fees-profit-and-data-2720798">Arby’s</a> franchisee,&nbsp;<a href="https://finance.yahoo.com/news/arby-franchisee-files-chapter-11-075100806.html?utm_source=1851franchise.com&utm_medium=article&utm_campaign=two-big-brand-multi-unit-qsr-franchisees-declare-bankruptcy-on-the-same-day-2726574" target="_blank" rel="nofollow">also declared Chapter 11 bankruptcy on June 20</a>. This marks the second bankruptcy for the group since 2010. The company, which operates restaurants across Illinois, Indiana, Texas, Mississippi and Louisiana, cited several reasons for its financial distress, including the lingering effects of the COVID-19 pandemic, inflationary pressures, negative same-store sales and delays in receiving over $3 million in Employee Retention Tax Credits from the IRS.Despite efforts to sell underperforming stores and seek relief from landlords and Arby’s, Miracle could not stave off bankruptcy. The group plans to sell 17 stores across Texas, Illinois and Indiana to focus on its remaining locations in Louisiana and Mississippi. Economic conditions have worsened, with rising labor and commodity costs outpacing price increases, eroding cash reserves and profit margins.These&nbsp;<a href="https://1851franchise.com/understanding-franchisee-bankruptcy-and-its-implications-for-franchisors-2725252">bankruptcies</a> underscore some of the critical financial pressures QSR franchisees face in today’s market, including the impact of significant legal liabilities, declining sales and rising operational costs. Key takeaways for franchisors and franchisees include:<ul><li>Proactive Risk Management:&nbsp;The importance of addressing employee safety concerns and implementing robust security measures cannot be overstated. Failure to do so can result in substantial legal and financial repercussions, as seen in River Sub's case.</li><li>Financial Resilience: Franchisees must build financial resilience to weather economic downturns and unexpected expenses. Diversifying revenue streams and maintaining cash reserves can provide a buffer against such challenges.</li><li>Operational Efficiency: Constantly evaluate and improve operational efficiency to manage rising costs effectively. This includes optimizing labor and commodity expenses and ensuring that price adjustments keep pace with inflation.</li><li>Adaptability and Flexibility: Be prepared to adapt business models and strategies in response to market changes. This might involve selling underperforming units, as Miracle Restaurant Group attempted, or seeking strategic relief and support from franchisors and landlords.</li><li>Transparency and Support:&nbsp;Franchisors should offer transparent financial performance data and support to help franchisees navigate financial difficulties. This can foster a more resilient and informed franchisee network.</li></ul> For more information on bankruptcy and departed brands, check out these related 1851 Franchise articles:<ul><li><a href="https://1851franchise.com/where-did-subway-go-wrong-2721389#stories">Where Did Subway Go Wrong?</a></li><li><a href="https://1851franchise.com/understanding-franchisee-bankruptcy-and-its-implications-for-franchisors-2725252">Franchisee Bankruptcy: Implications for Franchisors</a></li><li><a href="https://1851franchise.com/rip-the-top-5-franchise-brands-that-no-longer-exist-2721885">RIP: The Top 5 Franchise Brands that No Longer Exist</a></li></ul>

Subway and Arby's Franchisees File for Bankruptcy: An Emerging Trend?

1851 Franchise

A 48-unit Subway franchisee and a 25-unit Arby’s franchisee both filed for Chapter 11 last week — is it a coincidence or does it point to a troubling trend in the QSR category?

Two Big-Brand, Multi-Unit QSR Franchisees Declare Bankruptcy on the Same Day

two-big-brand-multi-unit-qsr-franchisees-declare-bankruptcy-on-the-same-day

Benjamin Franklin Plumbing

image of a benjamin franklin plumber employee franchise

Top 5 Reasons To Invest in Benjamin Franklin Plumbing Right Now

benjamin-franklin-plumbing-franchise-5-reasons-to-buy

Mister Sparky Electric

image of mister sparky cars franchise authority brands

Wired for Success: 5 Powerful Reasons To Invest in a Mister Sparky Franchise Now

mister-sparky-franchise-5-reasons-to-invest

image of Mister sparky electric employee working with customer

On-Time, Every Time: How Mister Sparky Delivers the Electrical Service Homeowners Can Count On

mister-sparky-electric-service-franchise

image of mister sparky electric on time elctricians from franchise mister sparky

The Electrician You Can Count On: How Mister Sparky Delivers Power, Punctuality and Profitability

mister-sparky-franchise-power-punctuality-profitiability

image of a benjamin franklin plumber employee helping a customer

The Punctual Plumber That Wins: How Benjamin Franklin Plumbing Redefines Home-Service Reliability

benjamin-franklin-plumbing-home-service-reliability

Buying a Franchise Masterclass

 Franchise Opportunities

Get Support Buying a Franchise

How to Buy a Franchise White Paper

How to Buy a Franchise

How to Sell Franchises

How to Grow a Franchise

Find a Franchise Supplier

1851 Franchise Opportunities

Franchisor News

Franchisor Power Rankings

FranCamp Mastermind Summit

Franchise Development Website Builder

Franchise Resources

What ALEC-Laffer's Report Means for Franchising

Website Awards

Power Rankings

About 1851

Advertise on 1851

Contact 1851 Editorial

Terms of Use

1851 Login

GROWTH CLUB LOGIN

facebook

instagram

twitter

linkedin

youtube

Planet Fitness Franchisees Donate $100K to Support Texas Flood Relief - 1851 Franchise

Planet Fitness Franchisees Donate $100K To Support Texas Flood Relief

planet-fitness-texas-flood-relief

McDonald’s Is the Latest Franchise To Bet Big on Beverages with 500-Store Premium Drink Test

mcdonalds-is-the-latest-franchise-to-bet-big-on-beverages-with-500-store-premium-drink-test

Friendly’s Parent Company Acquired by Multi-Unit Franchisee as More Owners Take the Lead in Brand Acquisitions 

friendlys-parent-company-acquired-by-multi-unit-franchisee-as-more-owners-take-the-lead-in-brand-acquisitions

Subway - John Fitzpatrick Named CEO - Breaking News - 1851 Franchise

Subway Names Jonathan Fitzpatrick as New CEO, Effective July 28

jonathan-fitzpatrick-subway-ceo-leadership-change

AI Is Reshaping Franchising: $100 Billion Valuations and Hyper-Localized Advertising

ai-is-reshaping-franchising-100-billion-valuations-and-hyper-localized-advertising

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores - Agg - 1851 Franchise

Hooters Leans Into Franchising With Closure of 30 Company-Owned Stores

hooters-franchise-model-company-owned-closures

Rising Jobless Claims Could Signal Challenges — and Opportunities — for Franchising

rising-jobless-claims-affect-franchising

"Come in, We're OPEN" sign against abstract background

Small Business Optimism Dips, Raising Concerns for Franchise Owners

small-business-optimism-dips-raising-concerns-for-franchise-owners

Hely and Hiral Patel Bring Their Longtime Dream to Life With The Brass Tap

brass-tap-franchise-pasadena-maryland-hely-hiral-patel

DevHub - Meet the Supplier - 1851 Franchise

DevHub: Scalable Digital Marketing for Franchises and Multi-Location Brands

devhub-meet-the-supplier

1851 Keyword - The Secret To Succeeding With a Part-Time Franchise Is Picking the Right Model

The Secret To Succeeding With a Part-Time Franchise Is Picking the Right Model

part-time-franchises-picking-the-right-model

Navy Veteran and Professional Artist Couple Open Caring Transitions in Texas

Navy Veteran and Professional Artist Couple Set Out to Build a Purpose-Driven Business With Caring Transitions in Texas

navy-veteran-and-professional-artist-couple-set-out-to-build-a-purpose-driven-business-with-caring-transitions-in-texas

Why This Real Estate Broker Decided To Bring Caring Transitions to Central Texas

Two Big-Brand, Multi-Unit QSR Franchisees Declare Bankruptcy on the Same Day

MORE STORIES LIKE THIS