Meritage Hospitality Group, one of the largest Wendy’s franchisees in the U.S., filed for bankruptcy after the burger chain moved to terminate its franchise rights across more than 300 restaurants.
The Grand Rapids, Michigan-based company filed its petitions September 17 in the U.S. Bankruptcy Court for the Western District of Michigan. Meritage operates 320 quick-service and casual-dining restaurants across 15 states, including 314 Wendy’s locations. The company employs approximately 8,850 people.
According to a declaration from chief restructuring officer Kevin Cleary, Wendy’s subsidiary Quality Is Our Recipe LLC delivered a notice September 16—one day before the bankruptcy filing—purporting to terminate all of Meritage’s franchise agreements and lease occupancy rights “effective immediately.”
Meritage disputes the effectiveness of the notice and contends that the franchise agreements remain in place and are part of its bankruptcy estates.
Wendy’s claims Meritage owes approximately $27.4 million in past-due royalties and fees, along with nearly $119.5 million in “Continuous Operations Fees.” The total claimed amount is roughly $146.9 million.
Meritage plans to use the bankruptcy process to consider strategic options to preserve its core Wendy’s business. Those efforts could include additional restaurant closures, sales of underperforming locations, strategic market sales to raise liquidity, a reduction of the portfolio to a sustainable size, and a recapitalization of the balance sheet.
The company said it believes it can restructure while preserving jobs and restaurant operations across its footprint.
Meritage entered the quick-service industry in 1998 with the acquisition of 28 Wendy’s restaurants in Michigan. Beginning in 2009, it completed 28 acquisitions involving 295 Wendy’s locations. The company grew to 317 total restaurants by 2018 and has deployed nearly $400 million across its portfolio, including the construction of roughly 100 new restaurants and renovations of older locations.
Meritage’s current footprint spans Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Mississippi, Missouri, North Carolina, Ohio, Oklahoma, Tennessee, Texas, and Virginia.
In addition to its Wendy’s portfolio, Meritage operates one Bojangles and five independent restaurants under the Morning Belle and Blue Porch Bar & Grill banners in Michigan. The company signed an agreement in July 2025 to develop 15 Bojangles restaurants by April 2031 and opened its first location under the deal in February.
The bankruptcy followed a sharp deterioration in Meritage’s sales and profitability.
Revenue declined 7.6 percent from $668.8 million in fiscal 2024 to $617.7 million in fiscal 2025. Same-store sales fell 7.2 percent, and the company swung from net income of $8 million in 2024 to a net loss of $31.5 million last year.
The downturn accelerated in 2026. Revenue dropped 14 percent to $273.6 million during the six months ending June 28, compared with $318.1 million in the year-ago period. Same-store sales decreased 8.3 percent, and Meritage posted a net loss of $23.1 million.
The company attributed the pressure to several factors, including what it described as less frequent and less effective Wendy’s marketing under prior brand management, unusually disruptive winter weather in the South, deep discounting at the national level, and historically high beef costs. Meritage’s average beef cost increased 18.9 percent year-over-year during the three months ending June 28.
Meritage began receiving default notices from its primary lender and Wendy’s in the fourth quarter of 2025. The lending defaults included failures to satisfy financial covenants and pay obligations as they came due. Its franchise defaults stemmed from missed required payments.
Wendy’s conditionally agreed not to terminate the franchise agreements through August 2026 under a series of agreements beginning in November 2025. Meritage also entered into forbearance arrangements with its lenders.
Those protections expired around August 18. The company continued negotiating for extensions through October, but no agreement materialized before Wendy’s issued its termination notice.
Meritage had already begun shrinking its portfolio and cutting costs under Cleary, who was retained in December 2025. The company closed approximately 60 underperforming Wendy’s restaurants beginning in the fourth quarter of last year, generating an estimated annual EBITDA benefit of $8 million.
It also eliminated or modified breakfast service at numerous locations, a move expected to contribute another $3.2 million in annual EBITDA. An internal restructuring removed $7.3 million in general, administrative, and operational expenses, while Meritage suspended its employer 401(k) match in November 2025.
The company additionally completed 18 sale-leaseback transactions in fiscal 2025, generating $41.1 million in proceeds. It used $33.7 million to reduce debt. Five more transactions during the first half of 2026 brought in another $11.3 million.
As of summer 2026, Meritage reported approximately $725.9 million in assets, $651.2 million in liabilities, and $74.6 million in equity. It owed about $137 million under a primary credit facility led by City National Bank, $15 million under a secondary facility with Old National Bank, and $2.8 million across three loans from Union Bank. Its operating lease obligations totaled approximately $390.8 million.
