The franchise model comes with risks and rewards for restaurants.
On the plus side, a chain can expand quickly without spending significant capital. However, this comes with the risk that the franchise operator will struggle or fail, damaging brand perception.
That happened to Burger King in 2024 when Carrolls Restaurant Group, one of its largest franchise operators, filed for Chapter 11 bankruptcy and closed dozens of restaurants.
Restaurant Brands International, the parent company of Burger King, bought the company out of Chapter 11.
“With the closing of the acquisition, RBI added the largest Burger King franchise in the United States to its portfolio as part of the company’s Reclaim the Flame plan. As previously announced, the company will invest an additional $500M to accelerate the re-imaging of more than 600 Carrolls restaurant operators over the next seven years,” the company shared in a press release.
That move reassured the public and investors that Burger King itself was healthy and expanding, not in contraction mode, when Carrolls struggled.
Now, a major Burger King and McDonald’s competitor, Carl’s Jr., has found itself in a similar position as one of its largest franchise operators has filed for Chapter 11 bankruptcy protection.
Friendly Franchise Corporation filed for Chapter 11 bankruptcy protection through the U.S. Bankruptcy Court in the Central District of California, according to documents filed with PacerMonitor.
The company filed for bankruptcy under various subsidiaries, including Senior Classic Leasing, DFG Restaurants and Second Star Holdings.
As a junior operator of Carl’s, the company operates 65 restaurants in California, a state with more than 575 locations of the fast-food burger chain.
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Carl’s Jr. shared a statement clarifying that this is an isolated franchise, not a broader issue.
“This situation is unique to the financial and business circumstances of this individual franchisee,” a company spokesperson told Restaurant Dive. “This will have no impact on the operations of any other Carl’s Jr. locations, and we remain committed to providing quality experiences for our guests, driving profitable, sustainable growth for our franchisees and brands.”
Senior Classic Leasing, LLC – Chapter 11 (CA Central): filed a voluntary Chapter 11 petition in US BANKRUPTCY COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA (Case No. 8:26-bk-11058) in April 2, 2026According to PacerMonitor.
DFG Restaurants, Inc. – Chapter 11 (Carl’s Jr. franchise affiliate): Filed a Chapter 11 petition April 2, 2026In the Central District of California, with affiliated entities, as part of the same franchise bankruptcy group, PacerMonitor reported.
Second Star Holdings, LLC – Chapter 11 (affiliate of Carl’s Jr. franchise): Also filed for Chapter 11 April 2, 2026As part of a similar group of affiliated creditors in the U.S. Bankruptcy Court for the Central District of California, according to PacerMonitor filings.
Related files in the same bankruptcy group: Includes Chapter 11 filings Sun Gir Inc. and Third Star Investments LLCExcept the above three institutions, all are related Maitri Franchise Corporation (Operator of Carl’s Jr./Hardy’s)According to Restaurant Business Online.
Business Reference: These filings are part of the bankruptcy for one 65-unit Carl’s Jr. franchises operating throughout CaliforniaRepresenting one of the largest single franchise reorganizations in the brand’s history, according to Restaurant Business Online.
Carl’s Jr. The locations earn less than McDonald’s and Burger King restaurants. Shutterstock ·Shutterstock
Carl’s Jr.’s franchise and Carroll’s filings are not unique.
“In recent years, several major fast-food franchise owners have filed for bankruptcy. These include the November 2023 bankruptcy filings for Wendy’s franchise Starboard Group and Burger King franchise Premier Kings. And last April, another major Burger King franchise, Consolidated Burger Holdings, also filed for Chapter 1 protection.
Filings are not limited to franchise operators.
“The restaurants that exist today may not exist in five years. They will be off the map,” bankruptcy attorney Daniel Gilchinsky told Fox Business. Additionally, consumers will “see more restaurants with a reduced footprint.”
Rising costs and falling demand have hurt restaurant operators. Labor, food and rent have all climbed.
“All of those pressures that franchisees cite as causing problems in their operating economic models show no sign of abating as we head into 2024,” Eric Danner, a partner in CohnReznick’s restructuring and dispute resolution practice, told Restaurant Dive.
Carl’s Jr. restaurants have not been as successful as many of its major competitors.
“In 2025, Carl’s Jr.’s projected average unit volume is $1.4 million, according to Circana’s Definitive US Restaurant Ranking 2026. That’s less than half the projected AUV at McDonald’s, but just under Burger King’s $1.6 million AUV. Circana estimates that Carl’s lost $1.4 billion in consumer spending. That its location count declined by 3% in 2025,” Restaurant Dive reported.
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This story was originally published by TheStreet on April 7, 2026, where it first appeared in the Restaurants section. Add TheStreet as a preferred source by clicking here.
