SouthRock Capital: Billion-dollar debt and the receivership of the Starbucks and Subway brands

SouthRock Capital: Billion-dollar debt and the receivership of the Starbucks and Subway brands

SouthRock Capital, the company that owns renowned brands such as Starbucks, Subway, Eataly and TGI Fridays in Brazil, recently filed for judicial reorganization. With an accumulated debt of R$ 1.8 billion, the company took this step to protect some of its operations in the country and readjust its business model amid the current economic reality. SouthRock's decision highlights the challenges faced by companies, particularly in the food sector, as a result of the economic crisis exacerbated by the pandemic, inflation and high interest rates.

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Challenges facing the Brazilian economy

The economic crisis that has affected Brazil, aggravated by the global pandemic, has imposed significant challenges on companies across the country. Inflation and constant exchange rate variations have increased market volatility, making it less predictable and more unstable. Brazilian entrepreneurs have faced difficulties related to the low level of confidence in the market and high interest rates.

In response to this challenging scenario, SouthRock Capital has taken the decision to seek the financial protection offered by judicial reorganization. This will allow the company to re-evaluate its business model and take the necessary steps to face these economic adversities.

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Necessary adjustments

SouthRock's planned adjustments include reviewing the number of stores currently in operation and re-evaluating the timetable for new openings. In addition, the company plans to redefine its relationships with suppliers and stakeholders. A reorganization of the workforce is also part of the company's plans.

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Impact on sales and access to credit

The request for judicial reorganization highlights the significant impact on the company, with sharp drops in sales. SouthRock reported a 90% drop in sales in 2020, followed by reductions of 70% in 2021 and 30% in 2022. In addition, the company has had difficulties obtaining credit for working capital, which has affected its operations. Rising input prices in the retail sector also posed an additional challenge.

Maintaining physical stores during the pandemic has also been a considerable obstacle for SouthRock.

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Strengthening corporate commitment

Despite the challenges, SouthRock is reinforcing its commitment to ongoing business and to all parties involved in the midst of market instability. The company had already started a restructuring process, including hiring external consultants, to deal with the challenges presented by the economic situation.

Founded in 2015, SouthRock Capital has played a key role in the expansion of international brands in Brazil in the food sector. In addition to Starbucks and Subway, the company works with other notable brands such as Eataly, Brasil Airports Restaurantes and TGI Fridays.

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Conclusion 

The company is the master licensee of Starbucks and TGI Fridays in Brazil, and has played an important role in the expansion of these brands in various regions of the country. It has also been responsible for operating the Eataly gastronomic center in São Paulo since 2022. SouthRock Capital remains committed to facing economic challenges and maintaining excellence in its business and operations.

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