Red Lobster and BurgerFi went bankrupt. That doesn’t mean customers will punish them for their financial hardships
What do Tupperware, BurgerFi, and Big Lots have in common? They are all very well-known brands that have filed for bankruptcy—and that was just within the past month. In a typical year, no fewer than 18,000 businesses will seek bankruptcy protection, often to liquidate, but sometimes to stave off creditors, reorganize, and hopefully reemerge as stronger companies. Their numbers include many consumer-facing household names, such as Red Lobster and Rite Aid, which have built up their brand equity over decades only to now find themselves facing down an uncertain future. But financial hardship may not be the liability that one would expect when it comes to brand perception. According to exclusive new data from Fast Company and the FutureBrand Index, a decisive 67% of respondents said they are still willing to stick with brands they admire during the worst of times, even insolvency or a bankruptcy. That percentage is even higher among Gen Z and millennials, with 77% of 21- to 30-year-olds and 71% of 30- to 40-year-olds saying they’d continue to support a financially struggling brand. In the end, only 11% of respondents said they would be less likely to support a company due to its money woes. “When we talk about loyalty through the filter of brand, we tend to focus on how it propels the positive growth of a brand, but the value of loyalty is properly demonstrated when the road gets rough,” Jon Tipple, FutureBrand’s global chief strategy officer, said in a statement to Fast Company. “It’s at times like this when you see how deeply customers connect with a brand’s story and values.” FutureBrand's data is based on interviews with 3,000 "informed" professionals from regions around the world who are knowledgeable about seven or more major companies ranked by PwC. The full 2024 FutureBrand Index report, which analyzes brand perception for PwC's top 100 companies as measured by market capitalization, is due to be released on October 8. For lossmaking companies in the throes of a reorganization, the data offers reasons to be optimistic, especially if they are beloved. Asked about how they thought a financial crisis would impact a company they supported, 71% of respondents said they believed the company would be stronger once it recovered, versus only 8% who said it would be weaker. Let the bad times roll Company bankruptcies and other financial problems often attract negative headlines for good reasons. Seafood chain Red Lobster was plagued by mismanagement and bad business decisions for years—including a private equity deal that saddled it with debt and expensive leases—before it started closing restaurants and filed for Chapter 11 protection in May. But let's not forget that a major contributor to its operating losses last year was a much-hyped promotion for endless shrimp. Red Lobster would not have taken a bath on that promotion had it not been for the throngs of diners around the country who love eating at Red Lobster. (The brand recently said it will move forward with a bankruptcy exit plan under new ownership and a new CEO.) Of course, customer goodwill has its limits, and it certainly won't magically wave away past misdeeds, Tipple says. "The emissions scandal still looms large over Volkswagen despite its size and legacy, [because] trust lost is hard to win back," he observes. On the flip side, he cites Apple and Samsung as two companies that have faced their share of crises over the decades only to win new legions of loyal customers through reinvention and innovation. Such success stories might offer a lesson for, say, BurgerFi, the fast-casual restaurant chain that filed for Chapter 11 last month after struggling to get a handle on pandemic-era economic pressures and a 2020 SPAC merger that fell flat with investors. Although the company did close a handful of underperforming restaurants, it said recently that all of its remaining 144 locations will continue operating during the bankruptcy process with no disruption to customers. Even the worst of times shouldn't interfere with people's ability to get a good burger.
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What do Tupperware, BurgerFi, and Big Lots have in common?
They are all very well-known brands that have filed for bankruptcy—and that was just within the past month.
In a typical year, no fewer than 18,000 businesses will seek bankruptcy protection, often to liquidate, but sometimes to stave off creditors, reorganize, and hopefully reemerge as stronger companies. Their numbers include many consumer-facing household names, such as Red Lobster and Rite Aid, which have built up their brand equity over decades only to now find themselves facing down an uncertain future.
But financial hardship may not be the liability that one would expect when it comes to brand perception. According to exclusive new data from Fast Company and the FutureBrand Index, a decisive 67% of respondents said they are still willing to stick with brands they admire during the worst of times, even insolvency or a bankruptcy.
That percentage is even higher among Gen Z and millennials, with 77% of 21- to 30-year-olds and 71% of 30- to 40-year-olds saying they’d continue to support a financially struggling brand.
In the end, only 11% of respondents said they would be less likely to support a company due to its money woes.
“When we talk about loyalty through the filter of brand, we tend to focus on how it propels the positive growth of a brand, but the value of loyalty is properly demonstrated when the road gets rough,” Jon Tipple, FutureBrand’s global chief strategy officer, said in a statement to Fast Company. “It’s at times like this when you see how deeply customers connect with a brand’s story and values.”
FutureBrand's data is based on interviews with 3,000 "informed" professionals from regions around the world who are knowledgeable about seven or more major companies ranked by PwC. The full 2024 FutureBrand Index report, which analyzes brand perception for PwC's top 100 companies as measured by market capitalization, is due to be released on October 8.
For lossmaking companies in the throes of a reorganization, the data offers reasons to be optimistic, especially if they are beloved. Asked about how they thought a financial crisis would impact a company they supported, 71% of respondents said they believed the company would be stronger once it recovered, versus only 8% who said it would be weaker.
Let the bad times roll
Company bankruptcies and other financial problems often attract negative headlines for good reasons. Seafood chain Red Lobster was plagued by mismanagement and bad business decisions for years—including a private equity deal that saddled it with debt and expensive leases—before it started closing restaurants and filed for Chapter 11 protection in May.
But let's not forget that a major contributor to its operating losses last year was a much-hyped promotion for endless shrimp. Red Lobster would not have taken a bath on that promotion had it not been for the throngs of diners around the country who love eating at Red Lobster. (The brand recently said it will move forward with a bankruptcy exit plan under new ownership and a new CEO.)
Of course, customer goodwill has its limits, and it certainly won't magically wave away past misdeeds, Tipple says. "The emissions scandal still looms large over Volkswagen despite its size and legacy, [because] trust lost is hard to win back," he observes.
On the flip side, he cites Apple and Samsung as two companies that have faced their share of crises over the decades only to win new legions of loyal customers through reinvention and innovation.
Such success stories might offer a lesson for, say, BurgerFi, the fast-casual restaurant chain that filed for Chapter 11 last month after struggling to get a handle on pandemic-era economic pressures and a 2020 SPAC merger that fell flat with investors. Although the company did close a handful of underperforming restaurants, it said recently that all of its remaining 144 locations will continue operating during the bankruptcy process with no disruption to customers.
Even the worst of times shouldn't interfere with people's ability to get a good burger.
