Wendy's franchisee Meritage files for bankruptcy

Overview

Updated Oct 2

Meritage Hospitality Group, one of Wendy's largest franchisees, filed for Chapter 11 bankruptcy on September 17 in Michigan. The company runs 314 Wendy's restaurants and employs about 9,000 people across 15 states.

Wendy's terminated the franchise agreements a day before the filing and says Meritage owes about $147 million in unpaid royalties and fees. Meritage disputes that and in late September filed a new adversary complaint to keep the agreements in force. A key hearing is set for October 14.

Why it matters

The fight over who runs 314 Wendy's restaurants will decide thousands of jobs and signal how healthy the chain's franchise system really is.

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Key Indicators

314

Wendy's restaurants operated by Meritage

Meritage is one of Wendy's largest franchisees, with locations across 15 states.

9,000

Employees affected

Meritage employs about 9,000 people. Stores remain open during the Chapter 11 process.

$150M

Debt owed to City National Bank

NRN reports about $155 million in total secured debt, most owed to City National Bank, which declared the loan in default in 2025.

Q2 2026 same-store sales decline

Wendy's U.S. same-restaurant sales fell 7% in Q2 2026 from a year earlier; systemwide sales fell 8.2%.

$24.9M

Deferred franchise fees in bankruptcy records

Quality Is Our Recipe LLC, Wendy's franchising arm, is Meritage's largest unsecured creditor with a $24.9 million claim for deferred fees.

$27.4M

Unpaid royalties Wendy's says Meritage owes

Wendy's separately claims $27.4 million in past-due royalties plus $119.5 million in continuous operations fees for restaurants Meritage closed.

$651M

Total liabilities reported in bankruptcy

Bloomberg reports about $651 million in liabilities against $725.9 million in assets.

Restaurants at risk of closure

NRN reports the U.S. Trustee objected to a plan to close up to 40 restaurants. Some reports put the number at up to 30. Closures run on a rolling schedule through October 16.

Voices

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People Involved

Kevin Cleary

Restructuring Advisor

Advising Meritage through its Chapter 11 case

Bob Wright

Chief Executive Officer of Wendy's

Leading Wendy's turnaround effort

Bob Schermer Jr.

Chief Executive Officer of Meritage Hospitality Group

Leading Meritage through Chapter 11 restructuring

Organizations Involved

Meritage Hospitality Group

Franchise Operator

In Chapter 11 bankruptcy

One of Wendy's largest franchisees, operating 314 Wendy's restaurants in 15 states.

Wendy's

Fast food chain

Dealing with franchisee distress

Third-largest burger chain in the U.S., struggling with a six-quarter same-store sales decline.

City National Bank

Bank

Meritage's largest creditor

The bank that holds $150 million in Meritage debt and declared it in default in 2025.

Quality Is Our Recipe LLC

Franchisor

Terminated Meritage's franchise agreements

Wendy's franchising subsidiary and Meritage's largest unsecured creditor.

U.S. Bankruptcy Trustee

Government Agency

Opposing Meritage's restaurant closure plan

Federal trustee overseeing the Meritage Chapter 11 case.

Timeline

June 2026 September 2026

9 events Latest: September 29th, 2026 · 1 week ago

Tap a bar to jump to that date

September 2026
Meritage sues Wendy's over franchise termination
Latest Legal

Meritage filed an adversary complaint against Wendy's and Quality Is Our Recipe LLC, asking the bankruptcy court to declare its franchise agreements remain in effect and to block Wendy's from enforcing the termination.
September 29th, 2026
Meritage moves to reject leases and close more restaurants
Legal

Meritage filed a motion to reject leases and executory contracts. Several Wendy's locations, including stores in Virginia, Florida, Texas, and Oklahoma, were slated to close beginning September 25, with more closures planned through October 16.
September 25th, 2026
U.S. Trustee objects to closure of up to 40 restaurants
Legal

The U.S. Bankruptcy Trustee opposes Meritage's plan to shut up to 40 more stores, saying the court and creditors need time to review which locations should close.
September 22nd, 2026
Meritage files Chapter 11 bankruptcy
Legal

Meritage Hospitality Group and 14 affiliates file in the US Bankruptcy Court for the Western District of Michigan (case 26-02947), citing Wendy's brand headwinds and their debt load. The petition lists assets and liabilities of $10 million to $50 million each.
September 17th, 2026
Wendy's franchising unit is top unsecured creditor
Legal

Court records name Quality Is Our Recipe LLC, Wendy's franchising business, as Meritage's largest unsecured creditor with a $24.9 million claim for deferred franchise fees.
September 17th, 2026
Meritage discloses cost cuts ahead of filing
Legal

The company says it closed about 60 restaurants, changed or ended breakfast service at more than 100 locations, and cut $7.3 million in expenses before seeking bankruptcy.
September 17th, 2026
Wendy's terminates Meritage franchise agreements
Legal

Wendy's franchisor Quality Is Our Recipe sends termination notices for all 314 Meritage locations, one day before the Chapter 11 filing. Wendy's says Meritage owes $27.4 million in past-due royalties.
September 16th, 2026
August 2026
Wendy's appoints Bob Wright as CEO
Leadership Change

Wright takes over amid a leadership shakeup and promises to address food, pricing, and marketing.
August 2026
June 2026
Wendy's reports sixth straight quarterly sales decline
Earnings

Wendy's same-store sales fall 7% in Q2, prompting a dividend cut and withdrawal of its full-year forecast.
June 30th, 2026

Scenarios

Meritage emerges from Chapter 11 with restructured debt

Possible Resolves by Q2 2027

Discussed by: Restaurant Business, industry analysts

Meritage negotiates a plan with City National Bank to reduce its $150 million debt, closes more underperforming stores, and exits bankruptcy with a leaner operation. The court confirms a plan, and the 314 restaurants remain open under Meritage's ownership.

Meritage liquidates, stores sold or closed

Uncertain Resolves by Q1 2027

Discussed by: Restaurant Business, Reuters

If Meritage cannot reach a deal with creditors or find a buyer, it converts to Chapter 7 or winds down operations. The 314 Wendy's locations would be sold to other franchisees or closed, costing thousands of jobs.

Wendy's seizes the restaurants via franchise termination

Uncertain Resolves by Oct 31, 2026

Discussed by: Restaurant Business, NRN

If the bankruptcy court rules Wendy's properly terminated the franchise agreements before the filing, Meritage loses the right to operate the stores. Wendy's would transfer the restaurants to other franchisees or operate them itself.

Historical Context

2 moments from history that rhyme with this story — and how they unfolded.

July 2020

NPC International / Pizza Hut (2020)

NPC International, the largest Pizza Hut franchisee with 1,200 locations, filed Chapter 11 after debt taken on during a 2006 buyout became unmanageable. Sales fell and rent obligations crushed cash flow.

Then

NPC closed about 300 locations and sold the rest to creditors in 2021.

Now

The bankruptcy showed how a massive franchisee's debt load can amplify a brand's decline, forcing chain-wide closures.

Why this matters now

Meritage's situation mirrors NPC's: a franchisee with heavy debt and declining same-store sales. The outcome will shape how Wendy's handles franchisee failures.

2008-2009