Several Popular Fast Food Chains File Chapter 11 Bankruptcy

By Daniel Walker | April 17, 2024

Franchise model

There is a common misconception that major fast food chains always rake in substantial profits without facing any financial challenges, but this notion is not entirely accurate. While certain chains continue to thrive, others have experienced a significant decline in earnings, leading to the closure of some outlets or even the declaration of bankruptcy.
 

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The majority of fast food restaurants operate on a franchise model, allowing individuals to pay a franchise fee to establish a branch of a well-known chain. In this setup, franchisees own and manage the business while adhering to the company's established format, utilizing its recipes and marketing strategies, and potentially receiving support from the corporate entity to ensure success.
 

Franchising

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Franchising as a concept dates back to the 1800s, but it wasn't until the 1950s that it became prevalent in the fast food industry. Over the past 75 years, this franchising model has exhibited remarkable success. Nonetheless, there have been instances where individual franchise owners struggled to maintain the standards set by the corporate brand, leading to closures of underperforming stores despite the overall prosperity of the brand. In a rather peculiar turn of events in 2023, a significant development unfolded: Hundreds of Burger King establishments shut down, and numerous Popeyes franchisees declared bankruptcy.