Wendy's 61-Unit Franchisee Declares Bankruptcy

Estimated read time: 3 minutes and 42 seconds

WEN DEEZ?

Wendy's franchisee declares bankruptcy, citing post-pandemic consumer habits, increasing costs, and higher interest rates. (Read Here)

Wen Deez: Starboard Group, a 61-unit Wendy's franchisee based in Florida, has filed for bankruptcy due to the impact of post-pandemic consumer habits, increasing costs, and higher interest rates. The closure of nine underperforming locations and economic difficulties faced by the fast-food industry contributed to this decision.

Girls Gone Wild: Starboard Group's interest in a joint venture to build Wendy's stores in Brazil resulted in significant losses, putting strain on the franchisee's other management contracts and fees.

Additional Challenges: Wendy's decision to sell profitable restaurants in Virginia three years ago led to increased management costs and lower average profits per store for Starboard Group. The franchisee also faced financial pressure from extensive remodel mandates that required substantial capital investments.

Financial Burden: Despite receiving a $49.8 million loan in 2020, Starboard Group's portfolio was impacted by monthly interest payments, lower sales, and higher interest rates. The franchisee still owes significant amounts to lenders, further contributing to their bankruptcy.

🧠 EDITOR’S THOUGHTS

More Franchisee Bankruptcies to come: We’ve already seen three different Burger King franchisees declare bankruptcy this year. Several other restaurant chains have stated their issues with increased costs, labor, interest rates, and other reasons.

Store Remodels: Now combine that with the typical remodel mandates that occur every 5-7 years. These are costly renovations that range from $400K - $700K depending on the prototype requirements. Guess who has to pay for it.

Action Item: If your lease calls for the reporting of store sales, you should be tracking that performance. If your rent-to-sales ratio is above the 8% industry standard, you should be proactive especially if your base lease term is expiring soon.

Please reply with your thoughts, questions, or comments

TRIPLE NET TENDIES

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NET LEASE NUGGIES

• Potbelly Corporation, the popular neighborhood sandwich shop, has announced a new franchise agreement that will increase its presence in the greater Seattle-Tacoma region of Washington state.

• Huey Magoo’s Ozark: The 54th restaurant opening of Huey Magoo's spans 10 states and features an outdoor patio and drive-thru.

• Atomic Wings, known for its all-natural, hormone-free wings and innovative flavors, is breaking new ground with the first-ever drive-thru location in Houston.

• Dave's Hot Chicken, the fastest-growing restaurant chain in the nation, is opening its second location in Phoenix this week, with plans for more in the future.

• Robeks announced plans to expand throughout Arizona, with 10 operating locations by the end of 2023 and an additional 11 locations in the next 24 months.

• Slim Chickens, known for its hand-breaded, cooked-to-order tenders and loyal fanbase, opens its second location in Sarasota, FL. With over 250 locations in the US and UK and more than 1,150 locations in development, Slim Chickens continues to dominate the "better-chicken" segment.

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