Wendys largest franchisee files for bankruptcy as sales slump
of ConsumerAffairsMeritage Hospitality Group, one of Wendys largest U.S. franchisees, has filed for Chapter 11 bankruptcy protection while operating 314 Wendys restaurants.
The franchisee blamed falling sales, high beef costs, heavy discounting and other pressures that drove its restaurant-level earnings sharply lower.
The restaurants are expected to remain open during the restructuring, but the bankruptcy could result in additional closures or sales to other franchise operators.
Wendys is facing another challenge in its efforts to revive its struggling U.S. business: one of its biggest franchise operators has filed for bankruptcy.
Meritage Hospitality Group filed for Chapter 11 protection Sept. 17 in U.S. Bankruptcy Court for the Western District of Michigan. The Grand Rapids-based company operates 314 Wendys restaurants in 15 states, representing about 5% of the burger chains U.S. restaurant system.
Meritage employs about 9,000 people and says it intends to keep its restaurants operating and continue paying employees while it restructures. The company is seeking debtor-in-possession financing to fund operations during the bankruptcy process.
But the filing is potentially significant for Wendys because it provides a glimpse at the financial pressures facing the people who actually operate the chains restaurants.
Profits fell sharply
Meritage's financial problems intensified as sales and restaurant profitability deteriorated.
Its revenue fell 7.6% in fiscal 2025, from $668.8 million to $617.7 million, while same-store sales dropped 7.2%. The company went from an $8 million profit in 2024 to a $31.5 million loss in 2025.
Store-level earnings before interest, taxes, depreciation and amortization fell 48% in 2025, pushing restaurant profitability to its lowest level in about 30 years.
Conditions continued to deteriorate this year. During the six months ending June 28, Meritage's revenue declined 14% from the same period a year earlier, while same-store sales dropped 8.3%.
The franchisee cited several factors, including declining customer traffic, discounting, marketing issues and rising food costs. Beef was particularly painful: Meritage said its average beef cost jumped 18.9% from a year earlier during the three months ending June 28.
Wendys is also owed millions
The bankruptcy creates a direct financial issue for Wendys.
A Wendys affiliate is Meritage's largest unsecured creditor, with a claim of about $24.9 million in deferred franchise fees, according to bankruptcy reporting.
The dispute may be broader. QSR Magazine reported that Wendys sent Meritage a notice on Sept. 16 purporting to terminate its franchise agreements and lease occupancy rights. Meritage disputes whether the termination is effective and maintains that the franchise agreements remain part of its bankruptcy estate.
That dispute could become important in determining what happens to hundreds of restaurants.
What happens to the restaurants?
For now, consumers shouldn't assume their local Wendys is about to close just because it is operated by Meritage.
Chapter 11 is designed to allow a business to continue operating while reorganizing its finances. Meritage says it intends to do that.
But its Wendys portfolio has already become smaller. Meritage has closed about 60 underperforming Wendys locations since late 2025 as part of an effort to improve profitability.
Bankruptcy could lead to more changes. Possible outcomes include closing additional weak restaurants, selling locations or entire markets to other franchisees, reducing Meritage's overall Wendys footprint or restructuring its debt so it can continue operating a smaller group of restaurants.
A warning sign for Wendys
Perhaps the bigger issue is what Meritage's bankruptcy says about Wendys overall franchise system.
Franchised restaurant chains rely heavily on the financial health of their operators. Wendys collects royalties and other fees, but franchisees generally shoulder restaurant-level expenses such as food, wages, rent, utilities and debt.
That means franchisees can feel the impact of declining traffic and rising costs particularly quickly.
Meritage's troubles come as Wendys itself is dealing with weakening sales. U.S. same-restaurant sales have declined as the company competes for increasingly price-conscious fast-food customers. Restaurant Dive reported that Wendys is pursuing a turnaround under CEO Robert Wright.
Meritage's bankruptcy raises the question of whether other Wendys franchisees are encountering similar pressure.
Photo By CNET
Posted: 2026-09-22 11:15:14
