Wendy's Moves to Take Back 163 Meritage Restaurants

In mid-September, Wendy's tried to fire Meritage Hospitality Group. On Thursday, it said it wants to buy a large piece of it.

The burger chain disclosed in its third-quarter earnings release that it has signed a letter of intent with Meritage and the franchisee's lenders to acquire up to 163 Wendy's restaurants. The deal still needs a definitive agreement and bankruptcy court approval, and it remains open to "better and higher offers," the company said. Meritage is also exploring the sale and recapitalization of its other markets.

Taken together with a separate 42-restaurant sale already in motion, the letter of intent covers 205 restaurants, a majority of the 314 Wendy's that Meritage operated when it filed for bankruptcy.

The relationship broke in public. According to QSR Magazine's account of the bankruptcy filing, a Wendy's subsidiary delivered a notice on Sept. 16 purporting to terminate all of Meritage's franchise agreements "effective immediately." Meritage, based in Grand Rapids, Mich., filed for Chapter 11 the next day and disputed that the termination took effect. Wendy's said it was owed about $27.4 million in past-due royalties and fees, plus nearly $119.5 million in what it called "Continuous Operations Fees."

Meritage's numbers had been sliding for two years. Revenue fell 7.6% to $617.7 million in fiscal 2025, then dropped another 14% in the first half of 2026 as same-store sales fell 8.3%, according to the filing. The company blamed weaker national marketing, deep discounting, rough winter weather in the South and beef costs that rose 18.9% year over year in the three months ending June 28.

Since the filing, the franchisee has been shrinking in stages. It moved to close 41 money-losing restaurants, a list Wendy's wanted a say in, and it lined up an $18.6 million sale of 42 restaurants to a Dunkin' and KFC operator, about $443,000 a store.

The franchisor's own quarter

Wendy's results explain the urgency. U.S. same-restaurant sales fell 5.7% and U.S. systemwide sales fell 7.6%. The company opened 13 U.S. restaurants in the quarter and still ended it with 13 fewer than it started; year to date, the U.S. count is down a net 258. Wendy's ended September with 5,711 U.S. restaurants, compared with 5,979 a year earlier.

Franchisee stress is now visible in the franchisor's income statement. Operating profit fell 39.3%, in part because of lower net franchise fees tied to "an increase in the provision for doubtful accounts," the accounting line for money a company no longer expects to collect. Net income fell 66% to $15.1 million.

Chief executive Bob Wright framed the quarter around Dave's Way, a multi-year plan built on five strategic pillars. "I'm encouraged by how quickly our system has aligned around Dave's Way, our multi-year business strategy rooted in the values and standards established by our founder," Wright said in the release.

The most concrete change for operators is breakfast. Wendy's is making the daypart location specific rather than systemwide, after tests it said "yielded significant profit improvement." Chief financial officer Steve Cirulis said the decision could unlock up to $200 million in restaurant-level EBITDA across the system. Meritage had already eliminated or modified breakfast at numerous locations before its bankruptcy, according to its filing, which makes the franchisee look less like an outlier and more like an early adopter.

The turnaround is not free. General and administrative expense rose 26.3% to $73.1 million, and 24/7 Wall St. reported that the quarter's costs included $11.9 million in consulting fees tied to the new strategy. "We have evaluated the investment needs of Dave's Way and are confident we have the financial capacity to execute the strategy," Cirulis said, pointing to about $413 million in cash.

Buying, selling and being bought

All of this is happening while the ownership of Wendy's itself is in play. Trian Fund Management and partners including Flynn Group, one of the chain's largest franchisees, have offered $7.35 a share to take the company private for about $1.4 billion. A franchisor that is buying restaurants, reshuffling others and weighing a buyout bid at the same time is making long-dated decisions under short-dated pressure.

For other Wendy's operators, the phrase to read twice in the release is "well-capitalized, high-performing operators." The company said its portfolio work includes planned company acquisitions and transfers of franchised restaurants to that kind of owner. Put plainly, restaurants will move toward franchisees with balance sheets, and Wendy's is willing to hold units itself in between. It is the same playbook Bloomin' Brands is running this week with its bankrupt Outback franchisee.

What Wendy's did not disclose is a price. The bankruptcy court will invite competing bids for the 163 restaurants. If another operator outbids the franchisor, Wendy's gets the capitalized owner it says it wants without spending its own cash. If nobody does, the company that tried to terminate Meritage in September will end up owning a large share of it.