In a troubling sign for the fast food sector, Arizona-based Eegee's has declared bankruptcy and closed multiple locations.
Eegee's, known for its subs and frozen drinks, is a stark example of the broader challenges currently plaguing the fast food industry, Mail Online reported.
The regional chain, a competitor to Subway, filed for Chapter 11 bankruptcy on December 6, as confirmed by documents from a Phoenix federal court. This action was taken amidst a year hard-hit by economic downturns, affecting various players in the fast food domain.
Sector-wide, fast food chains are grappling with decreased consumer spending driven by inflation. Well-known brands such as McDonald's, Burger King, and Wendy's have all reported experiencing operational difficulties. Particularly hard hit was Subway, reporting a significant 9% drop in sales and facing criticisms over high prices and an aging store presentation.
Eegee's, which began as a humble frozen lemonade truck in 1971, has grown significantly over the years. Owned by the private equity firm 39 North Capital, the chain underwent expansion under new management since its acquisition in 2018. It increased its presence, especially in Phoenix, totaling 35 locations before the recent events.
Chris Westcott, who recently assumed the role of CEO at Eegee's two weeks before the bankruptcy, pointed to long-term struggles stemming from the pandemic's aftermath as a primary cause of distress. "The brand has been struggling since the pandemic. We just haven't bounced back to pre-pandemic levels," explained Westcott during a press statement.
The fallout of these challenges was stark, leading to the abrupt closure of five of their stores in critical areas including Tucson and Phoenix. Specific locations affected were Tanque Verde Rd., Ajo Way, Speedway Blvd., Grant Rd. in Tucson, and Peoria Ave. in Phoenix. These closures add to the three Tucson stores that were shut down during the summer, preceding the bankruptcy filing.
Eegee now faces about $2.8 million in debts to food suppliers, with these financial woes prompting the drastic measure of a bankruptcy declaration. According to Westcott, this move aims at stabilizing the brand, promising that operations at the remaining locations will continue without any changes to the menu or disruptions to the loyalty programs.
"The bankruptcy was a step towards stabilizing the brand," Westcott affirmed, assuring customers of business continuity. Such statements underscore an effort to maintain trust among consumers and stakeholders during these turbulent times.
The stress on Eegee’s, though particularly severe, reflects broader industry trends witnessed by several other chains. The year has seen bankruptcies from not only Eegee’s but also other notable names like Red Lobster, BurgerFi, Hooters, and Buca di Beppo, emphasizing the sector’s widespread strife.
For Subway, its struggles could exacerbate vulnerabilities to competitors like Jersey Mike’s, compounded by internal franchisee discontent with high royalty fees, mandated remodeling, and other operational challenges. Robert Zarco, a representative for Subway franchisees, commented, “If Subway keeps treating its franchisees the way it has over the last five years, ignoring their screams for help, Jersey Mike’s will have an easy task of gobbling up the Subway brand."
