Burger King confirms planned closure of five stores

Wednesday, 13 May 2020

Burger King slumps into receivership after Covid-19 forces stores to close.

A compromise has been reached between landlords, creditors and the operators of Burger King.

The compromise, announced on Wednesday, will allow the fast food restaurant chain to continue trading until a buyer can be found.

But five stores, Lambton Quay, Courtenay Place, Queen Street, Takapuna and West City, are now in formal consultation to be closed.

Franchise operators Antares Restaurant Group said the compromise allowed it to move forward with the process to sell the burger franchise outright.

Most Burger King outlets will remain open until a buyer is found.

* Burger King failed to compete with McDonald's and KFC

* Coronavirus: Burger King NZ owners in receivership, hopes of sale

'[We] are confident of finding a new owner who is committed to the long-term future of Burger King in New Zealand, supported by the strength of the Burger King brand and by the loyalty of our valued team members, supply partners and guests,' a media release from Antares said.

Burger King's New Zealand owners, Tango New Zealand Ltd, went into receivership on April 14 after the fast food chain took a significant hit during the coronavirus lockdown.

To prepare for the sale, creditors, including landlords, had been asked agree to a compromise deal, which would see them receive some of the money they were owed.

Creditors were given until 4pm on Tuesday to agree to the deal.

All staff at the restaurants set to close had been notified of the possible closures and a consultation process was expected to begin this week.

'We appreciate that this is upsetting news to those affected and management will provide all possible support and are working to redeploy affected individuals to other Burger King restaurants where possible,' Antares' media release said.

Unite Union National Secretary Gerard Hehir, says the Burger King deal is largely good news for staff.

Documents lodged at the Companies Office on May 6 showed $50 million was owed to senior lenders.

Receivers KordaMentha had previously said the lenders are a consortium of ANZ, ASB and Rabobank.

The banks supported the compromise deal, and had agreed to share half of any sale proceeds over $30 million if the company was sold as a going concern.

They had also forgiven some interest payments and provided an overdraft to assist in the restart of the business.

At April 1, the company had other creditors of approximately $11.8m, plus monthly rents of $1.7m it could not meet, compromise deal documents said.

Retail expert Juanita Neville-Te Rito says Burger King's previous management team had failed to invest in the experience for consumers.

Unite Union National Secretary Gerard Hehir said the agreement was a positive outcome for workers.

'It is in the interest of our members that the business is sold as a going concern,' he said.

'But we are obviously concerned about the closing stores. We will be working hard with our members to see what the options are.'

Hehir said some of the restaurants were quite busy and it wasn't clear why these were set to close.

Retail expert Juanita Neville-Te Rito said the previous management team had let the business fall into disrepair.

There had been a lack investment in customer experience and new product lines, she said.

The new management team that came on board about 12 months ago had been left scrambling to rebuild but it may have been too little, too late, Neville-Te Rito said.

Burger King opened in New Zealand in 1993, and had 83 restaurants with over 2600 staff.

But over the last 30 years Burger King had struggled to gain significant market share in New Zealand's competitive fast food market.

The chain held 14.9 per cent of the market in 2018, according to research company Roy Morgan.

Burger King sat just behind Domino's pizza chain which held 15 per cent of the market and KFC, with 17.7 per cent, but well behind McDonald's 33.3 per cent.