A large restaurant chain has recently filed for Chapter 11 bankruptcy as a consequence of significant revenue losses brought on by the worldwide epidemic.
As a result of several franchisees declaring bankruptcy, up to 400 Burger King locations had to shut.
Naturally, a major part of this can be attributed to the pandemic, which resulted in a sharp rise in costs, adjustments to labor requirements, and alterations in eating preferences, all of which led to the closure of those eateries.
The inability of many of these eateries to concentrate only on takeaway and drive-thru business led to Burger King’s bankruptcy.
Due to significant expenditures in technology, certain restaurant businesses have prospered while others have faltered.
The Street notes that despite a little stabilization of inflation, the pressure on these eateries has only grown due to the minimum wage increases by numerous restaurant chains—California has hiked it to $20.
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This morning’s market news: A sizable restaurant franchisee has declared bankruptcy.
The massive restaurant chain filed for bankruptcy unexpectedly today, according to Market News Today.
Now, a crucial business filed for unexpected bankruptcy due to an inaccurate estimate of the demand for its merchandise following the COVID-19 outbreak.
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Leading supplier of private label and branded cleaning supplies as well as personal protective equipment, Supply Source Enterprises, filed for Chapter 11 protection on May 21 in an attempt to sell its assets.
Impact Products and The Safety Zone are two Supply Source brands
The debtor from Guilford, Connecticut, claimed to have between $50 million and $100 million in assets and $180 million in financed debt in their petition. This debt consisted of about $40 million in unsecured debt, $80 million payable on a term loan credit facility, and $60 million owed on an asset-based loan.
Before the COVID-19 outbreak, which produced large demand for cleaning supplies and personal protective equipment in 2020, Supply Source had been consistently profitable with constant single-digit growth, according to a declaration by the debtor’s Chief Restructuring Officer Thomas Studebaker.
Due to the increased demand for safety, hygiene, and sanitation items during the pandemic in 2020, the business saw significant growth.
In 2020, the debtor recorded an adjusted EBITDA of $93 million, about 300% more than the year before.
But in the years that followed, the company’s financial performance declined.
The corporation commissioned an industry analysis in early 2021, based on the unprecedented demand in 2020, and concluded that the COVID-19 epidemic would significantly alter the cleaning supplies and protective equipment sector as well as the market for its products.
Additionally, the analysis predicted that the company’s growth due to COVID-19 would probably continue until 2024.
Based on the data from the research, the debtor boosted inventory purchases, although the costs were higher because of supply chain limitations during the pandemic, in anticipation of sustained client demand at raised pricing.
According to TheStreet, the pandemic’s beneficial effects on the market waned by the end of 2021, and demand for PPE returned to normal rates despite the study’s guarantee that growth would be sustained for years.
The firm had a lot of surplus inventory that it was unable to sell at the same prices and quantities due to the decline in demand.
The debtor’s need to find more storage space as a result of the extra inventory drove up storage expenses.
Due to these constraints, the company’s liquidity became more restricted, which resulted in a 26% decrease in yearly sales from 2022 to 2023 and a $13 million negative EBITDA in 2023.
Due to its financial problems, the debtor was $30 million overdrawn on its asset-based lending arrangement.
The debtor’s bank accounts were swept by the ABL lender in February 2024, which worsened the company’s financial problems.
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Juniper Calloway is a dedicated journalist with 3 years of experience in covering hard-hitting stories. Known for her commitment to delivering timely and accurate updates, she currently works with MikeandJon Podcast, where she focuses on reporting critical topics such as crime, local news, and national developments across the United States. Her ability to break down complex issues and keep audiences informed has established her as a trusted voice in journalism.
