- Meritage Hospitality operates 314 Wendy’s restaurants across 15 states as the burger chain works through declining US sales, store closures and weaker breakfast demand
A major Wendy’s franchisee has filed for Chapter 11 bankruptcy protection, adding pressure to the burger chain’s US restaurant system as franchise operators contend with weaker sales, higher operating costs and changes in customer demand.
Meritage Hospitality Group, which operates 314 Wendy’s restaurants across 15 states, filed for bankruptcy protection on Sept. 17 in the US Bankruptcy Court for the Western District of Michigan. The company said the restructuring is intended to strengthen its balance sheet while allowing its restaurants to continue operating.
The filing comes as The Wendy’s Company (NASDAQ: WEN) reports another quarter of declining US same-restaurant sales. Wendy’s said second-quarter 2026 global systemwide sales fell 6.5% on a constant-currency basis, while US same-restaurant sales declined 7%.
Why Did the Wendy’s Franchisee File for Bankruptcy?
Meritage said its financial difficulties were connected to broader pressures affecting the Wendy’s system, according to reports on the bankruptcy filing. The company had already undertaken a restructuring effort before entering Chapter 11. TheStreet reported that Meritage closed about 60 Wendy’s locations and reduced operating expenses by approximately $7.3 million as part of its prepetition restructuring.
The company also faced a franchise-related default. TheStreet reported that Wendy’s franchisor Quality Is Our Recipe LLC issued Meritage a notice of default in October 2025 after the franchisee failed to remit payments under its franchise agreements.
Meritage's bankruptcy filing lists assets and liabilities in the range of $10 million to $50 million, according to the bankruptcy reporting cited by TheStreet.
The Wall Street Journal reported that Meritage is seeking debtor-in-possession financing as it restructures, with the company intending to keep its restaurants operating and continue paying employees during the bankruptcy process.
How Many Wendy’s Restaurants Does Meritage Operate?
Meritage operates 314 Wendy’s restaurants, making up roughly 5% of Wendy’s US restaurant system, according to Restaurant Dive. The company also operates one Bojangles restaurant and five independently branded concepts across 15 states. The bankruptcy filing does not mean all 314 Wendy’s restaurants are immediately closing.
Instead, Meritage has said it intends to maintain restaurant-level operations during the Chapter 11 process. Restaurant Dive reported that the company has roughly 9,000 employees whose wages and benefits are expected to continue during the restructuring.
That distinction is important because Chapter 11 generally allows a company to reorganize while continuing to operate rather than immediately liquidating its business.
Why Is Wendy’s Struggling in the US?
The franchisee's bankruptcy comes against a difficult operating backdrop for Wendy’s. The company reported $3.42 billion in global systemwide sales during the second quarter, down 6.5% from the same period a year earlier. US same-restaurant sales fell 7%, while international same-restaurant sales declined 2.3%.
Wendy’s said the US same-restaurant sales decline was primarily related to weaker customer traffic, partly offset by higher average checks.
The company has also been closing underperforming restaurants. TheStreet reported that Wendy’s has been targeting roughly 5% to 6% of its US restaurants for closure under its Project Fresh restructuring program, equivalent to roughly 290 to 350 locations based on the chain's US footprint.
The closures are part of a broader effort to address restaurants that are performing below expectations and improve the economics of the remaining franchise system.
What Happened to Wendy’s Breakfast Business?
Breakfast has become another area of pressure for the chain. Wendy’s introduced breakfast nationally in 2020, but breakfast's contribution to sales has subsequently declined. TheStreet reported that breakfast represented 5.5% of Wendy’s overall sales in the second quarter of 2026, compared with 8% in the second quarter of 2020.
Wendy’s management has acknowledged that the company is still evaluating how breakfast should fit into its broader strategy. The company has allowed some franchisees to reduce or eliminate breakfast hours where the daypart has been weighing on restaurant economics. TheStreet reported that Meritage exited breakfast or altered breakfast hours at approximately 120 underperforming locations.
Wendy’s continues to offer breakfast at many locations, and its own website states that breakfast availability varies by franchisee.
How Much Did Wendy’s Sales Traffic Fall?
Wendy’s second-quarter filing provides a clearer picture of the pressure on its US restaurants. The company reported that US same-restaurant sales declined 7% in the second quarter. The decline was primarily driven by lower traffic, while higher average checks partially offset the weakness.
The company’s reported global systemwide sales decline also reflects the importance of the US market to the chain's performance. International systemwide sales increased 3.4% during the quarter, partially offsetting the US decline.
Wendy’s also reported that its global company-operated restaurant margin fell 200 basis points to 13.6% during the quarter, while income before income taxes declined 36% year over year to $48.6 million.
What Does the Meritage Bankruptcy Mean for Wendy’s?
The immediate effect is concentrated at the franchisee level rather than representing a bankruptcy filing by Wendy’s itself. Meritage is a franchise operator, while Wendy’s remains a separate publicly traded company.
However, franchisee financial health matters to Wendy’s because the company receives royalty revenue based on sales at franchised restaurants. Wendy’s states that franchise restaurant sales have a direct effect on its royalty revenues and profitability.
The bankruptcy therefore adds another point of pressure to a franchise system already dealing with restaurant closures, weaker traffic and changes in operating hours. The longer-term effect will depend on how Meritage restructures its debt, which restaurants remain open and whether the franchisee can restore the economics of its remaining locations.
What Happens to Wendy’s Breakfast Now?
The breakfast changes are likely to remain an area of focus as Wendy’s evaluates restaurant-level profitability. The company said the majority of its system continues to serve breakfast, but management acknowledged that some franchisees benefited financially after opting out.
Meritage's decision to eliminate or reduce breakfast at about 120 locations illustrates how franchisees can respond when a particular daypart does not generate enough sales to justify its labor and operating costs. Wendy’s has not announced that it will eliminate breakfast systemwide. Its current website continues to promote breakfast, while noting that hours and availability vary by location.