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

Pet Wants

FOX Reno: Summer Pet Safety With Pet Wants of Sparks

fox-summer-pet-safety-with-pet-wants-sparks

Workout Anytime

Workout Anytime Teams Up with Viral Baseball Star Kyle “KJ” Jackson to Inspire Fitness Journeys Nationwide

workout-anytime-teams-up-with-viral-baseball-star-kyle-kj-jackson-to-inspire-fitness-journeys-nationwide

Sola Salons

1851 Franchise Deep Dive graphic with Sola Salons logo

Sola Salons Franchise Costs, Fees, Profit and Data for 2025

franchise-deep-dive-sola-salons-franchise-costs-fees-profit-and-data

Paris Baguette Canada

image of paris baguette cake and franchise decorations

What Canadian Franchisees Want to Know: Paris Baguette Profit Potential and Franchisee Support

paris-baguette-franchise-canada-profit-support

Home Halo

How Home Halo Is Supporting the Growing Demand for Home Care

how-home-halo-is-supporting-the-growing-demand-for-home-care

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

Power Eats: Smoothie King Rolls Out Food Nationwide To Fuel Franchise Growth

smoothie-king-food-menu-power-eats

Keurig Dr Pepper Splits in $18 Billion JDE Peet’s Deal, Creating Global Coffee Giant

keurig-dr-pepper-splits-in-18-billion-jde-peets-deal-creating-global-coffee-giant

McDonald’s Rolls Out Major Value Push To Win Back Customers Amid Inflation

mcdonalds-rolls-out-major-value-push-to-win-back-customers-amid-inflation

Photo of Paris Baguette pastries and beverages 

Paris Baguette Celebrates 250th Café Opening in Frederick, Maryland, Accelerating Expansion and Reviving the Neighborhood Bakery Café

paris-baguette-250th-north-america-cafe

Restaurant Chains Open Their Wallets To Jump-Start Franchise Growth - 1851 Franchise

Restaurant Chains Open Their Wallets To Jump-Start Franchise Growth

restaurant-franchise-incentives-cash-royalty-holidays-fee-reductions

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

Wendy's CEO Kirk Tanner Steps Down - Breaking News - 1851 Franchise

Wendy’s CEO Kirk Tanner Steps Down Amid Challenges, Leaving Franchisees Facing Uncertainty

wendys-ceo-transition-kirk-tanner-franchisee-uncertainty

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

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

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

graphic image of a franchisee spotligh aman kaur of voodoo brewing

How This Trio of Friends Is Brewing Up Community With Voodoo Brewing Co. in Prosper, Texas

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

MORE STORIES LIKE THIS