Arby’s franchisee Miracle Restaurant Group LLC, based in Covington, La., has filed for Chapter 11 bankruptcy protection for the second time in its history.
The operator of 25 Arby’s locations in Illinois, Indiana, Texas, Mississippi, and its home state of Louisiana cited inflation of commodities and labor expenses “that price increases could not compensate for,” according to documents filed with the United States Bankruptcy Court of the Eastern District of Louisiana.
“This resulted in significant erosion in the variable cash earned from operations to cover the fixed costs of rent and debt service,” company manager Donald Moore said in the documents.
The company was able to sell three Indiana locations in September of 2023 and used the proceeds to pay down debt, however, attempts to sell its restaurants in Texas and Illinois, and the remaining two restaurants in Indiana, were unsuccessful due to declining earnings that made them undesirable, Moore said.
He added that sales at restaurants opened in the past three years failed to meet expectations
Miracle’s working capital also has been hampered by delays in $3.5 million in tax refunds it applied for under Employee Retention Tax Credits, which it requested in the quarters ended March 31, 2021, through September 30, 2021.
The franchisee appealed to its landlords and Arby’s corporate for assistance, but the responses were not sufficient to prevent the bankruptcy filing, Moore said.
Miracle has hired Peak Franchise Capital LLC to assist it in selling its remaining two Indiana restaurants as well as its seven Arby’s locations in Texas and eight in Illinois, and will focus on its operations in Mississippi and Louisiana.
As Miracle’s primary source of income is from operations, it has requested that it be able to use that income to run the restaurants and pay its 291 part-time and 31 full-time employees — including their health care and other benefits and child support garnishments that it processes for some of its employees — particularly since summer is its busiest months and it expects cashflow to improve during that time.
Miracle also has filed a customer practices motion to continue to honor gift cards and coupons, which account for less than $20,000, and a critical vendor motion to pay its food suppliers and advertising groups.
According to the bankruptcy filing, Miracles’ debt is between $1 million and $7.5 million.
Miracle also filed for Chapter 11 bankruptcy protection in 2010, when it operated more than 60 restaurants, according to the latest filing.
There are more than 3,500 Arby’s locations globally. The chain is part of Atlanta-based Inspire Brands, which also is the parent of Buffalo Wild Wings, Sonic Drive-In, Jimmy John’s, Dunkin’, and Baskin-Robbins.
Contact Bret Thorn at [email protected]