An iconic BBQ restaurant now files an unexpected bankruptcy in the state of Michigan due to ‘franchising requirements’.
Smokin’ Dutchman Holdings, which operates four Dickey’s Barbecue Pit locations in Michigan, has filed for Chapter 11 bankruptcy, citing “extreme” franchising requirements imposed by the brand.
The bankruptcy filing was revealed in court documents on Monday, highlighting the financial struggles faced by this beloved restaurant franchisee.
Dickey’s Barbecue Pit, a competitor to Sonny’s BBQ, boasts over 500 locations across 44 states.
According to Smokin’ Dutchman CEO Krage Fox, the franchise’s financial demands have become unreasonable, contributing to their decision to seek debt relief.
This marks a growing trend within the franchise sector, as other franchisees have also sought bankruptcy protection.
Notably, Miracle Restaurant Group, which operates 25 Arby’s locations, filed for Chapter 11 on June 20, attributing its financial woes to broader economic challenges.
While Fox did not specify which particular franchising requirements led to the financial strain, it is known that franchisees face a 6% royalty fee and a 3% marketing fee—rates that are reportedly lower than those of many competing brands.
In response to the bankruptcy filing, Jeff Gruber, Senior Vice President of Dickey’s, disputed Fox’s claims regarding the franchising terms.
He stated in an email that Dickey’s had provided significant operational support to Smokin’ Dutchman approximately 18 months ago to help stabilize their business.
Gruber assured that Dickey’s would continue to offer assistance, especially amid a capital reinvestment program that includes upgrades for all Dickey’s locations.
These enhancements will feature new signage, refreshed interiors, technology upgrades, and local advertising initiatives.
Although specific sales figures for Dickey’s franchises are not disclosed in their Franchise Disclosure Document, Smokin’ Dutchman reported annual revenue of approximately $3.34 million for 2023, averaging around $830,000 per location.
The franchise has faced challenges in recent years, losing more than 15 franchised restaurants.
Fans of Dickey’s Barbecue Pit can find its locations in suburban shopping centers and along busy streets, but the future of some franchises hangs in the balance as financial pressures mount.
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Also Read: Another Mall Clothing Retailer Now At High Risk of Bankruptcy
Other Economy News Today
A massive rental company with 34k locations now shuts down its operations after filing for bankruptcy and 22 years in business.
Users of movie rental company Redbox were left saddened after it was announced that it would be shutting down operations.
The announcement comes after the rental company’s parent company, Chicken Soup for the Soul Entertainment, filed for Chapter 11 bankruptcy.
According to court documents obtained by the Washington Post, the Connecticut-based company claimed to be one billion dollars in debt.
As a result, Redbox, which was a staple of many grocery stores including Walgreens, and CVS will be shuttered.
Many fans took to social media to express how upset they were with the loss.
“I knew it was coming, sadly,” UltraVada wrote in a post on X, formerly Twitter.
“It was inevitable,” a second person mourned.
“I knew this would happen when I heard they filed for Bankruptcy but its still sad to hear. I have a lot of fun memories of Redbox,” a third person lamented.
“I still don’t think this will be or ever be the end of physical media as we do still get remasters of some movies in 4k/Bluray.”
One person revealed that they had forgotten the rental service had existed.
Some users were not surprised by the announcement.
“Not surprised since nobody really rents videos anymore with the rise of streaming and what not,” one user admitted.
“Also kinda remember getting into a feud with them on here.”
One user also pointed out that the last remaining Blockbuster, located in Bend, Oregon, managed to outlive Redbox.
Redbox was acquired by Chicken Soup for the Soul Entertainment (CSSE) in 2022 and became one of the company’s flagship video-on-demand streaming services.
At its peak, CSSE operated more than 20,000 DVD rental kiosks across the country.
The company’s filing means that the company’s more than 1,000 employees will be laid off, per The Wall Street Journal.
It was also reported by Deadline that many employees at CSSE hadn’t received their paychecks and had medical benefits cut in late June.
Also Read: This Massive Mall Retailer Is Now Closing In California
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