Meritage Hospitality Group bankruptcy and Wendy’s dispute

Meritage Hospitality Group, a major Wendy’s franchisee operating hundreds of restaurants across 15 U.S. states, filed for Chapter 11 bankruptcy protection to restructure over $135 million in debt. The filing followed a notification from Wendy’s regarding the termination of franchise agreements, with the chain alleging approximately $27.4 million in unpaid royalties and $119.5 million in ongoing operation charges.

As part of its restructuring plan, Meritage intended to close unprofitable locations, but the proceedings evolved into a dispute between the franchisee and Wendy’s. The conflict centered on disagreements over potential damages and the selection of specific underperforming locations for closure. Meritage’s restructuring team contended that maintaining locations with deep losses undermined its closure program, while Wendy’s maintained that its preferred closures would better serve the overall restaurant portfolio.

Recent developments indicate the scale of closures may be larger than initially anticipated. Following the closure of 33 locations since the September 17 bankruptcy filing, the company faces the potential closure of up to 60 additional restaurants through mid-November. Including 60 locations closed earlier this year, the franchisee may shutter a total of 120 restaurants. Meritage cited weak profits and high beef costs as contributing factors. Court filings show targeted closures involve sites with low average unit volumes and negative EBITDA, with some reporting annual revenues of less than $900,000—less than half the Wendy’s system average. Lenders holding $155 million in secured debt are seeking to preserve cash by eliminating these money-losing sites.