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A major Burger King franchisee with dozens of locations has filed for Chapter 11 bankruptcy. Consolidated Burger Holdings, based in Destin, Florida, filed the court documents this week in the U.S. Bankruptcy Court for the Northern District of Florida. The franchisee now operates 57 Burger King restaurants in Florida and Georgia, after it reportedly closed 18 locations before its Chapter 11 filing. “Over the past several years, and particularly as a result of the COVID-19 pandemic, the Debtors business suffered significantly from loss of foot traffic, resulting in declining revenue without proportionate decreases in rental obligations, debt service, and other liabilities,” Consolidated Burger said in the filing. The documents also cited “significant hurdles resulting from industry headwinds,” resulting in financial turbulence for the franchisee. According to the documents, sales plummeted in the past two fiscal years. In 2023, the franchisee documented $76.6 million in sales and a net operating loss of $6.3 million. Last year, sales were down to $67 million with an amplified operating loss of $12.5 million. Consolidated Burger plans to continue operating during the bankruptcy proceedings and has been seeking a buyer. It listed assets at $78 million in the court documents.It’s unmistakably a tough time for restaurant franchisees, between rising food costs, as well as higher labor costs and slower foot trafficand that’s before restaurant owners begin to feel the impact of Trump’s tariffs. To get more customers in the door, fast food chains have been offering budget meal deals: Last year, Burger King launched a $5 meal deal promotion, similar to one McDonald’s was running.Still, on the whole, Burger King’s sales have been moving in the right direction. According to QSR, which monitors data on quick serve restaurants, the Burger King chain itself outperformed its peers in Q4 with a 1.5% increase in same-store sales compared to 1.2% increase among competitors.Last year, Burger King’s parent company, Restaurant Brands International (RBI), dumped more money into its ambitious restaurant remodeling plans for locations in the U.S. and Canada. RBI also bought Burger Kings largest U.S. franchisee, Carrols Restaurant Group, for $1 billion to expedite the process. RBI said it planned to spend about $2.2 billion on the remodels, and said that by 2028, 85% to 90% of its roughly 7,000 restaurants will be upgraded. At the time, Burger King U.S. President Tom Curtis told CNBC about the investment, saying, It was the first time in a long time that RBI had invested a significant amount of capital back into the business to coinvest with franchisees.” Curtis continued, I think the process was, Lets see how this works . . . and were seeing early results on remodels.
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E-Commerce
A consumer advocacy group filed a lawsuit this week to block insurers from charging California customers for $500 million in costs associated with the deadly Los Angeles fires. California’s insurance commission in February ordered insurers doing business in California to provide $1 billion to the FAIR Plan, the state’s insurer of last resort, to help it pay out claims related to the L.A. wildfires. The order allows insurers to recoup half the cost from its policyholders in the form of a onetime fee. The commissioner must approve the costs. The lawsuit, filed by Consumer Watchdog in Los Angeles, alleges Insurance Commissioner Ricardo Lara overstepped his authority and violated state laws for allowing for such cost shifting without going through the proper process. Such regulations have never been authorized in California and should have been vetted and approved by the Legislature or other oversight agencies before enforcement, Consumer Watchdog argued. The suit is asking the court to block Lara from approving the requests. There were at least three pending applications to implement a surcharge as of Tuesday, according to Consumer Watchdog. We look forward to defending the rights and pocketbooks of Californians and stopping this socialization of FAIR Plan losses at the publics expense, while the FAIR Plans profits will wholly remain with the insurance companies, Consumer Watchdog staff attorney Ryan Mellino said in a statement. The Department of Insurance said the lawsuit could make California’s insurance crisis worse. This hurts homeowners, small business and nonprofits who need access to insurance options, while doing nothing to address the insurance crisis, Gabriel Sanchez, a department spokesperson, said in a statement. “It also serves to undermine our efforts to restore competition to all areas of our state, so people can get off the FAIR Plan and back to the regular market. The FAIR Plan is the state’s last resort option for people who cant get private insurance because their properties are deemed too risky to insure. The plan, with high premiums and basic coverage, is designed as a temporary option until homeowners can find permanent coverage, but more Californians are relying on it than ever. There were more than 555,000 home policies on the FAIR Plan as of March, more than double the number in 2020. The plan estimated a loss of roughly $4 billion from the Eaton and Palisades Fires, which sparked January 7, destroyed nearly 17,000 structures and killed at least 30 people. The plan had already paid out more than $914 million as of February. The lawsuit will not affect the FAIR Plan’s ability to pay out claims, Consumer Watchdog said. The American Property Casualty Insurance Association, the largest national trade association representing home, auto and business insurers called the lawsuit a reckless and self-serving stunt. Insurers have paid ten of billions in claims and contributed more than $500 million to sustain the FAIR Plan after the L.A. fires, the group said. Blocking recovery of the additional costs insurers have paid to prop up the Fair Plan would jeopardize the last-resort coverage option for homeownersand push our fragile insurance market closer to total collapse,” Denni Ritter, the group’s representative, said in a statement. It is critical that the costs be spread equitably across a broader pool of insured customers to help restore Californias insurance market and protect access to coverage for all consumers. The regulation to allow insurers to shift some of the costs used to sustain the FAIR Plan is among the strategies unveiled by Lara last year. California is undergoing a yearlong effort to stabilize its insurance market after several major insurance companies either paused or restricted new business in the state in 2023, which pushed hundreds of thousands of homeowners onto the FAIR Plan. Wildfires are becoming more common and destructive in California due to climate change, and insurers say thats making it difficult to truly price the risk on properties. Of the top 20 most destructive wildfires in state history, 15 have occurred since 2015, according to the California Department of Forestry and Fire Protection. The state now gives insurers more latitude to raise premiums in exchange for issuing more policies in high-risk areas. That includes regulations allowing insurers to consider climate change when setting their prices and allowing them pass on the costs of reinsurance to California consumers. Trān Nguyn Associated Press
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E-Commerce
Welcome to AI Decoded, Fast Companys weekly newsletter that breaks down the most important news in the world of AI. You can sign up to receive this newsletter every week here. Nvidia gets burned by Trump on China chips Silicon Valley magnates fell over themselves to placate and appease President Donald Trump. Nvidia just found out why thats no guarantee of success. The company said in a Securities and Exchange Commission filing on Tuesday that the Trump administration will now require a license for the company to sell its H20 chipsthe most powerful GPUs still legal for exportto Chinese companies. Nvidia says it will take a $5.5 billion charge in its April quarter earnings reflecting a belief that the license is a permanent requirement and that it has little chance of getting one. With its market cap already down 20% this year, the company watched its shares plunge another 6% in after-hours trading on Tuesday. The license requirement comes after Nvidia had already made overtures toward Trump. CEO Jensen Huang recently dined with the president at Mar-a-Lago and has reportedly pledged to spend hundreds of billions of dollars on new U.S. data centers. Following the Mar-a-Lago dinner, NPR reported that the White House had backed off a plan to restrict the H20 chips. But in the end that wasnt enough to prevent the administration from effectively banning the H20 and gouging out a big chunk of Nvidias revenues. We lower our fair value estimate for wide-moat Nvidia to $125 from $130 as we cut our revenue estimates to exclude China now and in the future, Morningstar strategist Brian Colello wrote in an investor brief on Wednesday. We retain our Very High Uncertainty Rating. Shares appear undervalued to us, as tariff concerns are likely weighing on the stock. You can almost see the shrugged-shoulders emoji next to Colellos words: Nvidias investor downgrade has nothing to do with real demand for its products, which remains very high. The administration claims the export controls stem from national security concernsthat H20 chips would pose a threat should Beijing get control of them. But more likely, Trump recognizes Nvidias central role in the generative AI boom, and seized on the companys success as a chess piece in his grudge match against China. The move comes as Chinese AI companies are pulling ahead of their American counterparts in areas like self-driving cars and robotics, and are within striking distance of surpassing the U.S. in frontier model development. Many D.C. and Silicon Valley insiders will applaud the H20 restrictions. After all, they feed the defense sectors push to bulk up for a military conflict with China (perhaps around Taiwan), and may even slow Chinas considerable momentum in AI research. But this zero-sum, winner-take-all approach may have its downsides, too. Chinese company DeepSeek, for example, was spurred to some impressive AI innovation precisely because it was denied top-tier chips from U.S. competitors. And, as the pundit Thomas Friedman pointed out on The Ezra Klein Show, this centurys biggest problemsthe environment and AI safetyare world problems that will require cooperation and openness between the worlds two superpowers. And its not just Nvidia. Mark Zuckerberg is learning the same lesson: that Trumps loyalty can often seem transactional at best. The Meta CEO is this week being grilled in the witness chair of a government anti-trust action that could break up his company. Trump has an obedient, all-GOP commission, and yet hes done nothing to stop the case. This after Zuckerberg and company gave $2 million to Trumps inauguration fund, stood behind Trump at the inauguration, bent the knee at Mar-a-Lago and the White House a number of times, abandoned fact-checking on his social platform, promoted longtime Republicans to high positions within Meta, and discontinued DEI programs at the company. Zuckerberg offered the Federal Trade Commission $450 million, then $1 billion, to keep the case from going to trial, but FTC Chair Andrew Ferguson balked at the numbers and kept the court date. Trump didnt intervene. My guess is that all these tech honchos will eventually learn, in one way or another, what so many others havethe giant black sucking hole that is Donald Trumps ego simply cant be appeased. OpenAI releases its newest reasoning model, o3 OpenAI on Wednesday unveiled its next flagship reasoning model, called o3. As the second generation of OpenAIs thinking models, o3 can quickly gather contextual data and follow multiple reasoning paths to a correct answerall in real time in response to a user prompt. OpenAI says the new o3 model outperforms the o1 series in every respect and will replace it. A key advance lies in o3s ability to use external tools to arrive at sound answers. For instance, it might review all the published papers on a specific research problem before crafting its own novel answer, or reason over the contents of an uploaded image. The combined power of state-of-the-art reasoning with full tool access translates into significantly stronger performance across academic benchmarks and real-world tasks, OpenAI said in a blog post published Wednesday. According to OpenAI, the o3 model earned state-of-the-art status atop the Codeforces (coding skill), SWE-bench (software engineering skill), and MMMU (visual and textual reasoning skill) benchmark tests. OpenAI says it used 10 times more computing power to train the o3 model than the o1, utilizing new reinforcement learning that incorporates either human or synthetic feedback to improve the quality of its answers. To me the magic is that under the hood its still just next-token prediction, OpenAI President Greg Brockman said during a livestreamed demo Wednesday. Weve changed the objective, changed where the data comes from, and now were able to really hook it up to the world. Alongside o3, OpenAI also released a smaller, faster, and more budget-friendly reasoning model called o4-mini, which the company says excels in math, coding, and visual tasks. In addition, the company introduced Codex CLI, a desktop coding assistant that is powered by the o3 and o4-mini models. A vibe shift in the way enterprises are talking about AI and the workforce When corporate executives say AI will usher in a new age of efficiency, what exactly do they mean? At first blush, it sounds like an opportunity to cut down on labor costs (personnel-related headaches). But the truth is more complicated. Over the past year, people in both the corporate and technology worlds have been quick to stress that AI will assist human workers, not replace them. And that narrative has been picked up by people at the management level, as a new survey from Beautiful.ai seems to suggest. The firm, which sells an AI presentation builder, surveyed 3,000 managers and found that as AI tool use in the workplace rises, most doubt that AI can or should replace human workers. The percentage who said their teams wouldnt function well if some humans were replaced by AI rose 20% over last years survey, to 63% of respondents. And only 30% think replacing staff with AI would be financially beneficialdown 17% from 2024. Meanwhile, 65% say employee resistance to AI remains a top concern. Its hard to say how much these managers are simply parroting the PR du jour to a surveyor. But it does raise the concern that as real workers begin to gain experience with AI tools, confidence in their potential for actually altering workflows doesnt seem to be growing. Meanwhile, a survey by HR software provider G-P finds that 67% of U.S. executives remain willing to cut headcount and use AI to become 50% more productive. More AI coverage from Fast Company: What Ex Machina got right (and wrong) about AI, 10 years later Docusign expands beyond signatures with new AI-powered contract management tools The next big AI shift in media? Turning news into a 2-way conversation Krea, an Adobe for the AI era, discusses its $500 million vision Want exclusive reporting and trend analysis on technology, business innovation, future of work, and design? Sign up for Fast Company Premium.
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