Meritage Hospitality Group, one of Wendy’s largest U.S. franchisees, has filed for Chapter 11 bankruptcy protection while operating 314 Wendy’s 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.
Wendy’s 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 Wendy’s restaurants in 15 states, representing about 5% of the burger chain’s 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 Wendy’s because it provides a glimpse at the financial pressures facing the people who actually operate the chain’s 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.
Wendy’s is also owed millions
The bankruptcy creates a direct financial issue for Wendy’s.
A Wendy’s 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 Wendy’s 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 Wendy’s 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 Wendy’s portfolio has already become smaller. Meritage has closed about 60 underperforming Wendy’s 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 Wendy’s footprint or restructuring its debt so it can continue operating a smaller group of restaurants.
A warning sign for Wendy’s
Perhaps the bigger issue is what Meritage's bankruptcy says about Wendy’s overall franchise system.
Franchised restaurant chains rely heavily on the financial health of their operators. Wendy’s 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 Wendy’s 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 Wendy’s is pursuing a turnaround under CEO Robert Wright.
Meritage's bankruptcy raises the question of whether other Wendy’s franchisees are encountering similar pressure.