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January 18, 2011 - Burnsville, MN - One Burger King franchisee is showing the stresses of a lackluster economy and increased franchisor pressure after they filed for Chapter 11 bankruptcy protection on December 4th.
The South Florida Business Journal reports that Minnesota-based Duke and King Acquisition Corp. filed the notice with the District of Minnesota's U.S. Bankruptcy Court after debts from various lenders totaled more than $15 million. A $33.2 million loan from Bank of America back in November 2006 still carried a balance of $11 million, while private equity firm Kinderhook Industries of New York City is owed about $2.7 million.
The actual Burger King Corp. is owed nearly $2 million by Duke and King, but according to the struggling franchisee the corporation is partially to blame for the bankruptcy. Pressure to sell many menu items for under $1, especially the double cheeseburger, was costing their stores too much money. After franchisee complaints and a case filed against Burger King Corp. in regards to the under $1 requirement, Burger King began changing some rules, but it was too late for Duke and King.
The debtors, especially Bank of America, hope that Duke and King can recover some losses through the closure of underperforming stores. The bankruptcy judge hearing the case allowed Duke and King to continue paying its employees, vendors and expenses in an amount of $7 million. The company has been claimed to be impossible to reorganize and is seeking buyers.
Parent company Burger King Corp. went private in October 2010 after it was purchased by about $4 billion by a 3G Capital affiliate. Following the purchase, more than 400 employees were laid off in a restructuring strategy. Burger King Corp. declined to comment on the Duke and King bankruptcy and only offered the statement that it buys time for them to "implement a business solution for their restaurants."
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