Bankrupt Burger Chain Franchisee Liquidating 59 Locations

Fast-food restaurant chain franchisees, whether they sell pizza or burgers, are facing significant downsizing in restructurings to eliminate underperforming locations.

Franchisees of chains such as Carl's Jr., Wendy's, Pizza Hut, and Papa John's have all announced recent closings of troubled locations.

Wendy’s said it planned to close 5%-6% of its 5,831 U.S. restaurant locations listed on its website, or about 292 to 350 underperforming units, in 2026, according to its Feb. 13 fourth-quarter earnings call.

Carl's Jr. franchisee closing 10 locations

And now, bankrupt Carl's Jr. franchise operator Sun Gir Inc., which filed a Chapter 11 petition in April, according to PacerMonitor, will not continue to operate any of the franchisee's 59 restaurants.

The La Palma, Calif.-based franchisee is selling 49 of its locations, mostly in Southern California, and decided to close its remaining 10 stores after failing to find a buyer for the underperforming restaurants, according to the Los Angeles Times.

The debtor's affiliate Friendly Franchisees Corporation owned 65 Carl's Jr. franchises when Sun Gir filed for bankruptcy protection on April 2, according to the franchisee's website.

Other affiliates that filed petitions include Senior Classic Leasing, DFG Restaurants, Second Star Holdings, and Third Star Investments, Restaurant Business reported. Friendly Franchisees Corporation did not file a bankruptcy petition.

Franchisee will sell 49 locations

Originally Sun Gir said it would sell 49 locations when it filed for bankruptcy but did not specify if it would close or continue to operate the 10 restaurants it now says it will close. Nine of the locations earmarked for closing are in Southern California, while one Northern California location is in Santa Rosa, Calif., according to Fast Company.

Friendly Franchisees Corp. CEO Harshad Dharod was not immediately available for comment.

"The risk of the franchise model is that a franchisee can fail even though the model is sound. We saw that last year with a number of chains and it’s a blow to the brand as consumers don’t understand the nuance, they just see the closures,”’ said TheStreet Co-Editor-in-Chief Daniel Kline.

Minimum wage law blamed for distress

The franchisee blamed California's minimum wage law for causing its financial distress, Restaurant Dive reported.

The franchisee's CEO and founder Harshad Dharod said increased labor costs from a $20 minimum wage in California prevented him from covering expenses. He also blamed lack of support and innovation from Carl's Jr. as contributing to its distress, the Times reported.

“This situation is specific to this individual franchisee’s financial and business circumstances,” a Carl's Jr. corporate spokesperson said. "This has no impact on the operations of any other Carl’s Jr. locations."

Liquidator hired for sale process

National Franchise Sales, a firm that specializes in liquidations, was hired to manage the marketing and sale process for the 49 Carl’s Jr. restaurant locations operated by Sun Gir Incorporated and affiliated entities as part of an ongoing Chapter 11 restructuring proceeding.

“The offering represents a significant multi-unit quick-service restaurant portfolio within a well-established brand system and highly competitive California market. The sale process is designed to attract qualified operators and strategic buyers capable of continuing long-term operations and leveraging the scale and geographic clustering of the portfolio,” according to an email NFS shared with TheStreet's Daniel Kline.

Carl's Jr., founded in 1941, has over 1,000 locations in the U.S. and 28 other countries, according to its website.

Fans of pizza chains Pizza Hut and Papa John's are also facing upcoming closings.

Pizza Hut‘s parent Yum Brands in February 2026 said it would shutter 250 underperforming locations as part of its Hut Forward plan in the first half of 2026.

Papa John’s unveiled in its fourth-quarter earnings call that it will close 300 underperforming restaurants, including 200 by the end of 2026. The company did not reveal a deadline for closing the remaining 100.

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