It's Possible, Against All Odds, For A McDonald's To Declare Bankruptcy

You don't have to look at statistics to know that McDonald's is by far, the most popular fast food chain in the U.S. Though if you did need to see numbers to confirm the theory, QSR Magazine reported that McDonald's made sales worth more than $45 million in 2021 through 12,775 franchises in the U.S. — nearly double the sales and franchises than the second most popular chain, Starbucks.

So it may seem shocking to even consider that any McDonald's franchise could report losses, let alone file for complete bankruptcy. But it turns out, even a McDonald's franchise can have a hard time with its finances. Rice Enterprises, an eight-unit McDonald's franchise that operates in the Pittsburgh area, recently filed for bankruptcy citing that it needed "breathing space, time to reduce litigation expenses, and maximize the value of its estate for all creditors and interests" to safeguard its agreements and restructure debts (via QSR Magazine).

Rice Enterprises has been running McDonald's franchises since 1987 with 435 employees currently staffed at its outposts. The Pittsburgh Business Times lists the enterprise as the largest business owned by a minority entrepreneur in the area, and surprisingly its bankruptcy filing doesn't come in the face of large amounts of debts. Instead, Rice Enterprises has been involved in a lawsuit regarding one of its employees who pleaded guilty to raping a 14-year-old girl in one of the franchise's restaurants (via CBS News).

A lawsuit may have pushed the franchise into bankruptcy

According to QSR Magazine, Rice Enterprises' liabilities are shown to be between $1 million and $10 million in court papers as opposed to its assets, which are valued between $10 million and $50 million. While the debt may not be larger than its assets, Rice Enterprises has been embroiled in a lawsuit where 42-year-old Walter Garner, a manager hired by the company, pleaded guilty to raping a young girl in one of the franchise's restaurant bathrooms.

Lawsuits were filed against both Rice Enterprises and McDonald's, holding them responsible for hiring Garner despite him being a registered sex offender from a previous case of assault against a 10-year-old girl in 2003 (via CBS News). Although Rice Enterprises denied the allegations, it listed the lawsuit as a possible claim in its bankruptcy filing.

Rice Enterprises' legal troubles may be a major cause for its bankruptcy, but it's not the first time a McDonald's franchise has gone bankrupt. A six-unit franchise ran by Brown Customer Delight Group, which once had ten units in Des Moines, was forced to shut down four of its outlets amidst losses and mounting debt and filed for bankruptcy with its remaining outposts in 2016 (via Nation's Restaurant News). Citing fierce competition from fast-food competitors, the company reported assets worth $6.7 million against $15.6 million in liabilities and a $6.1 million debt to Citizens Bank of Boston. It may be rare but even a McDonald's store can report losses and bankruptcy.