36,000 franchisees could shutter forever without a new stimulus package, as operators of iconic brands like Pizza Hut, Golden Corral, and more file for bankruptcy

  • Restaurant owners are scrambling after President Trump abruptly ended stimulus package negotiations. 
  • Roughly 36,000 franchisees will not survive the winter without additional government relief, according to the International Franchise Association.
  • Franchisees at chains including Pizza Hut, Golden Corral, Subway, and more have filed for bankruptcy during the pandemic.
  • Independent restaurants are in an even more precarious position. 
  • "We cannot afford five or six more weeks of decreased revenue, more debt, and uncertainty about colder weather," the Independent Restaurant Coalition said on Tuesday. 
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Restaurants are worried the pandemic will force them out of business, after President Trump called off stimulus talks on Tuesday, although late on Tuesday evening he seemed to soften his stance.

Roughly 36,000 franchisees will not survive the winter without additional government relief, according to the International Franchise Association. These franchisees are independent business owners who operate locations of restaurant chains like McDonald's, hotels like Marriott, and convenience stores like 7-Eleven. 

"Trading a broad, bipartisan bill now for the vague goal of something better after the election is like quitting a game in the third quarter," IFA senior vice president of government relations Matt Haller said in a statement. 

Many of the largest franchises in the US are major restaurant chains — an industry that is facing special struggles during the coronavirus pandemic.

"Restaurant employment decreased in nine states in the last available report, and this industry remains the largest contributor to national unemployment," the Independent Restaurant Coalition (IRC) said in a statement on Tuesday. "We cannot afford five or six more weeks of decreased revenue, more debt, and uncertainty about colder weather."

Independent restaurants often lack chains' financial resources and investments in areas such as technology that have become crucial during the pandemic. In June, the IRC estimated that 85% of independents could go out of business by the end of the year without further aid.

President Trump abruptly ended discussions about a second federal stimulus package on Tuesday, ordering Treasury Secretary Steven Mnuchin to stop negotiations until after the US election. A few hours later, Trump seemingly backtracked with a tweet urging Congress to approve standalone bills focused on direct stimulus check payments, as well as billions of dollars in assistance to airlines and small businesses. 

Franchisees have been struggling to survive the pandemic

About 32,700 franchised businesses are closed due to the pandemic, according to the IFA. 10,875 have closed permanently, as well as 21,834 temporary closures. 

Franchisees are typically better positioned than independent businesses to weather the pandemic. Many corporate franchisors have offered franchisees financial support and guidance in recent months. 

However, franchisees are ultimately facing the same struggles as other American businesses, especially those in the hospitality and restaurant industries. 

"Every franchisee is a small business, and they had to close up, and they're sucking wind," restaurant industry investor Roger Lipton told Business Insider in May. "They're hemorrhaging." 

Bankruptcies in the restaurant industry include NPC International, the largest franchisee in the US which operated 1,200 Pizza Hut and nearly 400 Wendy's locations. Buffet chain Golden Corral's largest franchisee, 1069 Restaurant Group, filed for Chapter 11 bankruptcy this week. Other franchisees to file for bankruptcy include owners of Subway, IHOP, and Ruby Tuesday locations.

Some franchisors have also struggled to stay afloat during the pandemic. At least 10 chains, including Ruby Tuesday, Sizzler, and California Pizza Kitchen, have filed for bankruptcy in recent months. Chains have announced plans to close more than 1,800 restaurants since the pandemic began, as companies attempt to cut costs and ditch underperforming locations. 

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