Meritage Hospitality Group, one of Wendy’s largest U.S. franchise operators, has filed for Chapter 11 protection amid falling sales, rising food costs, debt obligations and a dispute with the franchisor. The Grand Rapids, Michigan-based company operates 314 Wendy’s restaurants in 15 states—about 5% of the brand’s U.S. system—and says its restaurants are expected to remain open during the restructuring.

Meritage’s case is significant not only for the scale of its restaurant portfolio and workforce, but also for the creditor, contract and franchise-system issues now in play. The operator employs roughly 9,000 people and also runs one Bojangles restaurant and five independently branded locations.

Filing follows franchise dispute

Meritage filed its voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Western District of Michigan on Sept. 17, according to news reports and court-related filings. The filing came one day after Quality Is Our Recipe LLC, Wendy’s franchise business, issued a notice seeking to terminate Meritage’s franchise rights and lease-occupancy rights immediately, Fox Business reported. Meritage disputes the attempted termination and maintains that its franchise rights remain intact.

That timing could make the bankruptcy court a central venue for resolving whether Wendy’s can enforce termination rights, whether Meritage can assume or preserve key franchise and lease arrangements, and how much the franchisor is owed. Such disputes are especially consequential in restaurant restructurings because the debtor’s operating value generally depends on continued use of the brand, locations, supply relationships and restaurant-level systems.

Quality Is Our Recipe LLC is listed in the case as Meritage’s largest unsecured creditor with a $24.9 million claim for deferred franchise fees, according to CNBC’s review of the filing. Fox Business, citing court records, reported that Wendy’s franchising unit is asserting total claims of roughly $146.9 million, including about $27.4 million in past-due royalties and fees and $119.5 million in “Continuous Operations Fees.”

Weak sales and tighter margins

The bankruptcy arrives as Wendy’s works through a broader U.S. sales and traffic challenge. CNBC reported that the chain had posted same-store sales declines for six consecutive quarters, while Restaurant Dive characterized recent same-store sales declines as double digit in some quarters.

Meritage attributed much of its pressure to the performance of the Wendy’s system, where the substantial majority of its portfolio is concentrated. Among the factors cited in coverage of the filing:

• Higher beef costs.

• Weak consumer traffic and a more value-conscious customer.

• Heavy discounting and promotional activity that pressured franchisee margins.

• Debt-service obligations and a constrained capital structure.

• Lower store-level profitability amid sales weakness.cnbc+1

Meritage CEO Bob Schermer Jr. said store-level EBITDA fell 48% in 2025, according to CNBC and Fox Business. Fox Business also reported that the company posted a $31.5 million net loss in 2025, after $8 million in net income in 2024, while revenue fell 7.6% to $617.7 million.

The case underscores a familiar dynamic in franchise and restaurant-credit markets: operators can be squeezed from both sides when traffic and pricing power weaken while labor, food, occupancy, royalty and financing costs remain comparatively fixed.

Closures preceded Chapter 11

Meritage had already begun restructuring its operating footprint before the bankruptcy. The company closed approximately 60 underperforming Wendy’s restaurants and exited or modified breakfast operations at roughly 120 weaker locations, Restaurant Dive reported.

Those steps were intended to improve unit-level economics. The breakfast changes and closures were expected to generate more than $11 million in EBITDA benefits, according to reports citing company materials. Meritage also cut more than $7 million in general, administrative and operational expenses in connection with its internal restructuring efforts, Restaurant Dive reported.

Still, those measures were not enough to produce an out-of-court solution. Meritage said it had spent more than a year working with lenders and its franchisor before determining that a court-supervised restructuring was the most viable path to address its financial pressures.

What creditors should watch

The case will be closely watched by lenders, trade creditors, landlords, franchisors and collection professionals because it combines a large multi-state store portfolio with substantial franchise-related claims and a potentially contested termination process.

Key issues likely to emerge include:

Fox Business reported that Meritage had about $137 million outstanding under its primary credit facility as of the filing. The outlet also cited court records showing approximately $725.9 million in assets and $651.2 million in total liabilities as of summer 2026—figures that differ from the broader $10 million-to-$50 million asset-and-liability ranges reported on the initial bankruptcy petition. The discrepancy may reflect different reporting conventions, entity-level schedules, or financial-statement versus petition-range disclosures, and will likely be clarified as the debtor files schedules, statements of financial affairs and more detailed first-day materials.

Broader franchise implications

Meritage is one of the largest Wendy’s franchisees to enter bankruptcy since NPC International’s 2020 Chapter 11 case. NPC’s restructuring ultimately involved the sale of 393 Wendy’s restaurants as well as more than 900 Pizza Hut units.

For the collections industry, Meritage illustrates how rapidly operational headwinds can become a complex recovery matter when a large franchisee has layered obligations to secured lenders, franchisors, landlords, suppliers, employees and government entities. The immediate priority will be maintaining restaurant operations and payroll; the longer-term question is whether Meritage can use Chapter 11 to deleverage and stabilize—or whether the case evolves into a sale, refranchising process or more extensive rationalization of the Wendy’s footprint.