One of the largest Wendy’s franchisees in the U.S. has filed for bankruptcy, saying it has struggled with rising beef costs and “reduced frequency and effectiveness of Wendy’s brand marketing” under the burger chain’s previous management.
Meritage Hospitality Group Inc., which operates 314 Wendy’s locations, one Bojangles and a handful of other restaurants, sought Chapter 11 protection on Thursday, saying it has about $651 million in liabilities and $725.9 million in assets.
MHG said its stores will continue operating normally as it explores options for restructuring its business.
MHG Chief Restructuring Officer Kevin Cleary said in a sworn statement filed in court Saturday that the franchisee closed 60 underperforming Wendy’s locations at the end of last year and will continue to either close or sell other locations in Chapter 11.
The company said it also needs to resolve a “franchise termination dispute” with Wendy’s Co., which has asserted it’s owed about $147 million in past-due royalties and fees, according to court papers.
The bankruptcy of a major franchisee comes as Wendy’s Co. has sought to turn around the burger chain under new Chief Executive Officer Bob Wright, who took over the brand earlier this year.
MHG said its stores also struggled with rising costs driven by tariffs and “historically low herd levels,” saying its average beef costs increased nearly 19% for the three months ending in June compared to the prior-year period.
Wendy’s sales at established locations have fallen for six straight quarters, a decline analysts polled by Bloomberg expect will continue.
The chain has been hobbled by a series of management missteps, including a reliance on discounts and value offers that didn’t attract customers and a slip in food quality. MSG said the “deep discounting and national promotional strategies at the brand level” was one factor pressuring its margins.
Last month, Wright pulled Wendy’s 2026 outlook and cut its dividend as he devises his plan. The chain, known for its square patties, recently lost its spot as America’s No. 2 burger chain after resurgent rival Burger King, owned by Restaurant Brands International Inc., revived sales through remodels and an overhaul of its Whopper.
MHG said in court papers that it was also impacted by “unusual winter weather” associated with the La Niña cycle in the southern US, which disrupted its sales.
The company operates restaurants in Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, Tennessee, Texas and Virginia.
Wendy’s entered into a series of agreements with MHG beginning in November after the restaurant operator defaulted under its franchise agreements, according to bankruptcy papers. MHG said Wendy’s has said it’s owed $27.3 million in past due royalties and fees and another $119 million in operations fees.
A Wendy’s spokeswoman said in response to MHG’s Chapter 11 filing that the company works with franchisees that are experiencing challenges “to identify the best and most sustainable path forward.”
“Our focus remains on serving our customers, supporting our franchise system, and strengthening the long-term health of the brand,” the spokeswoman said.
MHG has filed a number of customary motions to keep paying employee wages and cover other normal expenses while it’s in Chapter 11.
The company said it has about 8,850 employees.
The case is Meritage Hospitality Group Inc., number 26-02947, in the U.S. Bankruptcy Court for the Western District of Michigan.
Randles writes for Bloomberg.
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