- Meritage operates 314 Wendy’s restaurants in the US.
- The franchisee owes more than $27m in unpaid fees.
- Wendy’s has challenged its right to keep operating the restaurants.
One of Wendy’s largest US franchisees has filed for bankruptcy, putting the future of 314 restaurants across 15 states under scrutiny.
Meritage Hospitality Group filed for Chapter 11 bankruptcy protection on September 17 in the US Bankruptcy Court for the Western District of Michigan, after facing declining sales and profitability pressures.
The company said it owed Wendy’s International nearly $25m, while Wendy’s subsidiary Quality Is Our Recipe (QIOR) said the franchisee had more than $27m in past-due obligations, including royalties, advertising and other fees.
The filing came just one day after QIOR terminated Meritage’s franchise agreements.
That has created an unusual problem for the bankruptcy proceedings: Meritage wants to continue operating its restaurants while it restructures, but Wendy’s is arguing that the franchisee no longer has the contractual right to run them.
Wendy’s wants a different route
In a court filing, QIOR objected to Meritage’s initial bankruptcy requests, arguing that approving them would allow the franchisee to continue operating restaurants that are no longer covered by a franchise agreement.
Wendy’s said it would consider giving Meritage a short-term licence to continue operating the restaurants while they are transferred to Wendy’s or other franchisees.
If the court allows Meritage’s proposed first-day motions to proceed, QIOR said the franchisee should make prompt payments under an interim licence on terms similar to the terminated agreements.
For now, Meritage has said it intends to evaluate its options and restructure its business. That could involve selling or closing underperforming restaurants.
The company said it was working to preserve jobs and restaurant operations across its 15-state footprint.
The bankruptcy filing lists between 1,000 and 5,000 creditors, with estimated assets and liabilities each ranging from $10m to $50m.
The financial pressure had been building before the filing.
Meritage reported an 11.3 per cent fall in same-store sales during the final quarter of 2025. It blamed a combination of weaker traffic, ineffective brand marketing, unusually poor winter weather in the southern US and higher operating costs.
Record beef prices were another major pressure.
Meritage said its average cost of beef increased 18.9 per cent from the previous year. It attributed the increase to historically low US cattle herd levels, disruption to Mexican beef imports and tariffs on beef from South America.
The franchisee also said heavy discounting and national promotions had put further pressure on margins.
For Wendy’s, the situation comes as the wider chain is already trying to reshape its restaurant network. The company announced plans in late 2025 to close around 300 underperforming restaurants across the US.
At the same time, Wendy’s reported opening 44 US restaurants during the first two quarters of 2026.
The Meritage case could therefore lead to several outcomes for its 314 locations. Some could be transferred to other Wendy’s franchisees, while others could be sold or closed if they are considered financially unviable.
Wendy’s said it was focused on supporting its franchise system and strengthening the long-term health of the brand, adding that it works with franchisees facing challenges on a case-by-case basis.
The immediate issue is now whether Meritage can continue operating its restaurants during bankruptcy proceedings and, ultimately, who will run the 314 Wendy’s locations if the franchise agreements are not restored.
