Summit Restaurant Holdings, a large operator of Hardee’s restaurants in several states, declared Chapter 11 bankruptcy on Thursday after closing 39 restaurants.
The company, which has $22 million in secured debt, once operated 145 restaurants in Alabama, Florida, Georgia, South Carolina, Kansas, Missouri and Wyoming. It is part of a larger group of companies that also operates Carl’s Jr. restaurants and operates 226 restaurants in 16 states.
Multiple court filings say the company currently operates 108 restaurants, though that leaves a discrepancy of two restaurants according to the bankruptcy filing.
Summit is planning to use the bankruptcy process to find a buyer, according to court documents. The company has an agreement with a “stalking horse” bidder, which provides the first bid in a bankruptcy court auction for the restaurants.
In a statement, Hardee’s parent CKE Restaurants Holdings said the restaurants are expected to be sold to a “qualified and well-capitalized buyer, with a record of success across the restaurant, entertainment, food, beverage and retail markets.”
The restaurants that remain open are expected to conduct “business as usual” during the sale process.
“CKE’s goal is to maintain the maximum number of stores continuing to operate, backed by a capital structure that is sustainable and poised for long-term growth and success, and we are working with all parties to achieve that goal,” CKE said in its statement.
According to court documents, Summit struggled with declining traffic during the pandemic and subsequent pressures on rising food and labor costs, which drained the company of cash flow.
Many of the 145 restaurants underperformed, with lower unit volumes and profit margins that made them more sensitive to rising costs. Some restaurants “were operating at a loss for a prolonged period of time.”
The company, which defaulted on its debt, employed an investment banker six weeks ago to find a buyer.
Several franchisees have filed for bankruptcy this year amid soaring costs, particularly in chains that did not recover as strongly from the pandemic as others. That includes a pair of large Burger King franchisees that filed for bankruptcy earlier this year.
Hardee’s struggled last year. U.S. system sales declined 4.2% in 2022, to just under $2 billion, according to data from Restaurant Business sister company Technomic. Average unit volumes declined 3% to below $1.2 million.
“Hardee’s is focused on its core customer and the products they crave, as well as investing in the physical infrastructure of restaurants, to grow traffic and sales,” CKE said in its statement.
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