Since the SouthRock Capital filed a request for judicial recovery, more than 40 stores in Starbucks have already been closed in Brazil. The company operates the Subway, Starbucks, Eataly and TGI Fridays brands in the country. With a debt of R$1.8 billion, SouthRock Capital alleged financial problems, volatility of interest rates, dollar variations and the Covid-19 pandemic as some of the reasons for the recovery judicial.
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The request was presented on October 31st at the São Paulo Court of Justice. In the year of the pandemic, SouthRock stated that its sales fell by 95% and that it had to deal with default by commercial partners. In 2021, the drop decreased to 70%, rising to 30% in 2022.
SouthRock had 187 Starbucks stores, but with the 43 stores closed in São Paulo, Rio de Janeiro and Porto Alegre since October, the company would only have 144 active stores. With the “adjustment of the business model to the current economic reality” announced by the company, Brazilians are wondering whether Starbucks and other brands will leave the country.
End of Starbucks and Subway in Brazil?
According to the judicial recovery request filed, Starbucks Coffee International Inc. would have notified SouthRock on November 13th with a request for immediate termination of the license agreements to use the brand in Brazil. The company announced that it received the measure with “absolute surprise”.
However, SouthRock announced that it requested to maintain the brand at least until completion of the judicial recoveryto pay debts to their creditors. Starbucks provides SouthRock with revenues of R$50 million per month, being one of its largest assets. Therefore, it is not yet known whether the company will lose the rights to operate Starbucks in Brazil.
In relation to Subway, SouthRock stated that the brand is not part of the request for judicial recovery “due to a business decision, taken together with its commercial partners”, it stated. However, the group's other brands, Eataly and TGI Fridays, are included in the request for judicial recovery.