A bankrupt Wendy's franchisee is shutting 41 money-losing restaurants. The franchisor wanted a say in which ones, offered to cover the losses, and was turned down.
Ten Wendy's restaurants were scheduled to go dark on Oct. 9. Wendy's wanted seven of them swapped for other stores, and it offered to cover the losses to make that happen. The franchisee said no.
That exchange is the newest turn in the Chapter 11 case of Meritage Hospitality Group, which ran 314 Wendy's in 15 states when it filed Sept. 17, a day after Wendy's emailed notice terminating all of its franchise agreements. We covered the opening round last month. The fight has since widened from whether Meritage still holds its franchises to which of its restaurants survive.
Meritage is closing 41 restaurants in tranches, stores that together generated about $4.2 million in negative EBITDA, Nation's Restaurant News reported. Wendy's objected to 10 of them and proposed closing seven different stores that, by its own math, lose less money. It said it would pay the difference, about $11,000 a month in EBITDA, arguing in a court filing that "the potential upside for the overall portfolio outweighs this nominal difference."
Kevin Cleary, Meritage's chief restructuring officer, was blunt. "Wendy's proposal would require [Meritage] keep open stores that are losing more money and to close stores that are losing less," Cleary said. "Every week the debtors keep a deeper-loss store open, the debtors' estates bear that loss." Meritage also noted the offer came with two days' notice and was not secured. Wendy's failed to stop at least two Michigan closures, Crain's Grand Rapids Business reported.
The store-level numbers explain why both sides care. The restaurants Meritage picked averaged $1.15 million in sales and lost $127,000 apiece over the past year. Wendy's list averaged $1.07 million and lost $114,000. The system average was about $2 million in 2025, according to NRN.
The closures keep coming. Meritage told the court 13 more stores would close as of Oct. 16, adding to 20 shut on earlier Fridays, Fast Company reported. Wendy's said its goal is "to preserve operations, improve restaurant performance and position the Wendy's system for sustainable long-term growth."
Underneath it all sits roughly $147 million in Wendy's claims, including more than $27 million in unpaid royalties plus liquidated damages for future royalties. Meritage calls the emailed notice "a non-termination termination." Federal appeals courts are split on whether a bankrupt franchisee can keep its agreements without franchisor consent, Bloomberg Law reported, and no controlling precedent covers Michigan's bankruptcy courts.
"It's all about who gets to control the process," James T. Markus of Markus Williams told Bloomberg Law. Until Judge James W. Boyd rules on the termination, Wendy's is fighting for that control one closure list at a time.
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