A Struggling McDonald’s Franchisee Just Declared Bankruptcy

Not even the famed Golden Arches are immune from this year's growing pool of bankruptcies. Since the start of 2023, Corner Bakery, two major Burger King franchisees, and a Popeyes franchisee have all sought bankruptcy protections to help fix their financial woes. But while these brands blamed their struggles on issues like inflation and drops in customer traffic, the newest bankruptcy filing from a McDonald's franchisee stems from legal drama that has surrounded the operator for more than a year.

Rice Enterprises LLC, which is based in Pittsburgh, Pa., currently operates eight McDonald's restaurants throughout the city and surrounding area. The franchisee declared bankruptcy last week as it continues to contend with legal issues and the financial fallout from a former manager's February 2021 rape of a then 14-year-old female employee inside the restaurant where they worked, Restaurant Business Magazine reported.

This is a rare bankruptcy declaration from a McDonald's franchisee, coming more than six years after a smaller operator for the fast food chain, the Iowa-based Brown Customer Delight Group Inc., filed for bankruptcy in 2016.

The former Rice Enterprises manager, Walter Garner, was able to secure a job as a manager at one of the franchisee's locations despite serving time in the past for the indecent assault of a 10-year-old girl, CBS reported. Garner has pleaded guilty to the rape, but Rice Enterprises and McDonald's are still facing their own ongoing legal battle for the case.

The girl's family sued the franchisee and fast food giant in September 2021, accusing both of negligence. Though McDonald's sought to have the case dismissed and argued that it should not be held liable for Warner's actions, a judge ruled in July 2022 that the lawsuit could go forward, according to CBS.

Now that Rice Enterprises has filed for bankruptcy, it said it is planning to use the process to restructure its debt, preserve its assets, secure more breathing room and time "to reduce litigation expenses and maximize the value of its estate for all creditors and interests," per Restaurant Business Magazine.

In the meantime, the managing partner of the law firm representing Rice Enterprises told the Pittsburgh Business Times that all of the franchisee's stores are operating normally.

Rice Enterprises was contacted for comment on the bankruptcy filing but did not immediately respond.