McDonald’s rival franchisee files Chapter 11, 65 restaurants at risk

The franchise model brings risks and rewards for restaurants.

The upside is that a chain can expand quickly without spending significant capital. However, this comes with the risk that a franchise operator will struggle or even fail, damaging the perception of the brand.

This happened to Burger King in 2024, when Carrols Restaurant Group, one of the largest franchise operators, filed an application. Chapter 11 Bankruptcy and closed dozens of restaurants.

Restaurant Brands International, Burger King’s parent company, stepped in and purchased the company from Chapter 11.

“With the completion of the acquisition, RBI adds the largest Burger King franchisee in the United States to its portfolio as part of the Company’s Reclaim the Flame plan. As previously announced, the Company will invest an additional $500 million to accelerate the revitalization of more than 600 Carrols restaurants before reassigning the majority of the acquired portfolio to new or existing smaller franchise operators over the next seven years,” the company said. Press release.

Taking this step reassured the public and investors that Burger King was healthy and in expansion mode, not contraction, while Carrols was struggling.

Now, Burger King and McDonald’s major rival Carl’s Jr. finds itself in a similar position where one of the largest franchise operators has filed for Chapter 11 bankruptcy protection.

Friendly Franchisees Corporation has filed for Chapter 11 bankruptcy protection through the U.S. Bankruptcy Court for the Central District of California. PacerMonitor.

The company filed for bankruptcy under various subsidiaries, including Senior Classic Leasing, DFG Restaurants and Second Star Holdings.

Carl’s Jr. As an operator, the company operates 65 restaurants throughout the state of California, where the fast food burger chain has more than 575 locations.

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Carl’s Jr. shared a statement making it clear that this was an isolated franchisee issue and not a broader issue.

“This situation is specific to the financial and business circumstances of this individual franchisee,” a company spokesperson said. Restaurant Dive. “This has no impact on the operations of other Carl’s Jr. locations, and we are committed to delivering quality experiences for our guests while driving profitable, sustainable growth for our franchisees and our brand.”

• Senior Classic Leasing, LLC – Chapter 11 (CA Central): We voluntarily filed a petition for Chapter 11. U.S. Bankruptcy Court for the Central District of California (Case No. 8:26‑bk‑11058) Open April 2, 2026accordingly PacerMonitor.

• DFG Restaurants, Inc. – Section 11 (subsidiary of Carl’s Jr. franchisee):
  Petitioned for Chapter 11 April 2, 2026As part of the same franchise bankruptcy group with subsidiaries in the Central District of California, it reported: PacerMonitor.

• Second Star Holdings, LLC – Chapter 11 (subsidiary of Carl’s Jr. franchisee):
  Also filed for Chapter 11 April 2, 2026in the U.S. Bankruptcy Court for the Central District of California as part of the same group of affiliated debtors. PacerMonitor references.

• Related applications in the same bankruptcy group: Chapter 11 filings include: Sun Gir Inc. And Third Star Investments LLCIn addition to the three organizations above, they are all affiliated with these. Friendly Franchisees Corporation (operator of Carl’s Jr./Hardee’s)accordingly Online Restaurant Management.

• Business context: These applications are part of bankruptcy Carl’s Jr. has 65 units operating throughout California. franchiseeIt represents one of the largest single franchisee restructurings in the brand’s history. Online Restaurant Management.

Carl’s Jr. The franchisee and Carrols’ applications are not unique.

“In recent years, a number of major fast-food franchisees have filed for bankruptcy. This includes the November 2023 bankruptcy filings for Wendy’s franchisee Starboard Group and Burger King franchisee Premier Kings. And last April, another major Burger King franchisee, Consolidated Burger Holdings, also filed for Chapter 11 protection.” Fast Company reported.

Applications are not limited to franchise operators.

“Restaurants that exist today may not exist in five years. They will disappear from the map,” said bankruptcy attorney Daniel Gielchinsky. Fox Business. “Additionally, consumers will “see more restaurants with smaller footprints.”

Rising costs and declining demand have hurt restaurant operators. Labor, food, and rent are all increasing.

“All of these pressures that franchisees have argued are creating problems for their business economic models show no signs of their impact abating as we head into 2024,” said Eric Danner of CohnReznick’s restructuring and dispute resolution practice. Restaurant Dive.

Carl’s Jr. its restaurants are not as successful as many of its major competitors.

“In 2025, Carl’s Jr. will have an estimated average unit volume of $1.4 million, according to Circana’s Definitive U.S. Restaurant Rankings 2026. This is much less than half the currently estimated AUV. McDonald’sbut just below Burger King’s $1.6 million AUV. Circana predicted Carl’s Jr. consumer spending would decline 4% to just over $1.4 billion and the number of locations would fall 3% in 2025.” Restaurant Dive reported.

Related: 93-year-old sandwich chain closes half of its restaurants

This story was first published by . Street It first appeared in Restaurants on April 7, 2026. Add TheStreet at: Preferred Source by clicking here.