Duke and King Acquisition Corp., a Burnsville, Minn.-based Burger King franchisee, has sought Chapter 11 bankruptcy protection and is currently seeking buyers. The company operates 92 Burger King units throughout the Midwest, including in Minnesota, Iowa and Wisconsin.
According to the Minneapolis/St. Paul Business Journal, D&K cited revenue shortfalls and a “constant drain” of capital expenditures ordered by the Burger King Corp. parent company.
The company has already closed five stores. Its subsidiaries, including DK Florida Holdings Inc., Duke and King Missouri Holdings Inc., Duke and King Missouri LLC and Duke and King Real Estate LLC, also have filed for Chapter 11 protection in Minnesota’s U.S. Bankruptcy Court.
D&K was incorporated in 2006 when it purchased 88 Burger King units from Nath Cos. Inc. Shortly thereafter, the company bought 24 more units in Missouri from Swisshelm Group Inc.
According to D&K’s filing report, these restaurants required considerable capital spending for upgrades. To generate funds for the improvements, the company planned to buy 66 more sufficiently-conditioned stores in the Des Moines, Iowa, and Omaha, Neb., markets, but the deal was denied by Burger King Corp. This left D&K with debt-laden, outdated restaurants, about $665,000 in monthly royalty fees and deficient cash flow.
Through 2008 and 2009, D&K sold off all of its real estate to make improvements to its 92 Burger King units, and has reinvested excess earnings back into the company. D&K claims it has spent more than $8.75 million on capital improvements.
D&K was loaned money by its creditors, including Bank of America Corp. and BK Corp., while it searched for buyers. Simultaneously, the recession and commodity price increases continued to affect D&K’s earnings, which dropped almost 10 percent in two years.
The bankruptcy court allowed D&K to spend close to $7 million to pay its 2,200 employees, vendors, utilities and other expenses.
The company owes about $11 million to the Bank of America, which has requested at least eight more closures. D&K said it will close underperforming stores with BK Corp.’s approval.
