Wendy's Largest Franchisee Meritage Files Chapter 11, Shuttering Dozens of Restaurants Amid Debt Dispute and Sales Slump

One of Wendy's largest franchise operators, Meritage Hospitality Group, filed for Chapter 11 bankruptcy protection on September 17, 2026, in the U.S. Bankruptcy Court for the Western District of Michigan, operating 314 Wendy's locations across 15 states at the time. The filing came one day after Wendy's subsidiary Quality Is Our Recipe sent a termination notice for the franchise agreements, citing approximately $146.9 million in owed royalties, fees, and continuous operations fees. Meritage has disputed the termination's effectiveness and sued to keep the agreements intact under bankruptcy protections.

The Grand Rapids, Michigan-based company had already closed 60 underperforming Wendy's restaurants prior to the filing as part of restructuring efforts. Since entering bankruptcy, it has shuttered at least 33 more locations, with court documents indicating up to 60 additional closures possible through mid-November 2026, potentially bringing the total to around 120. These closures target low-performing units with average annual revenues around $1.15 million—roughly half the system average—and negative EBITDA, driven by lender demands to preserve cash under a $155 million secured debt facility.

Meritage reported a $31.5 million net loss in 2025 after $8 million in net income the prior year, followed by a $23.1 million loss in the first half of 2026. Revenue declined amid system-wide same-store sales drops of 7.2% in 2025 and 8.3% in early 2026. The operator has pointed to weak sales, aggressive discounting, less effective marketing under prior Wendy's leadership, and high beef prices as key pressures. Wendy's overall system has seen over 300 net restaurant closures since 2024, including 245 in the first half of 2026.

In parallel restructuring moves, Meritage is seeking to sell 42 restaurants in Tennessee, Arkansas, Mississippi, and Missouri to Divine Infinity Operations for $18.6 million, with court approval expected by late November. The case highlights broader challenges for franchisees in a tough consumer environment and tests legal questions around franchise agreement terminations timed with bankruptcy filings.