Meritage Hospitality Group, one of the largest Wendy’s franchisees in the U.S., has filed for Chapter 11 bankruptcy protection following a high-stakes dispute with the fast-food chain's corporate parent.

The bankruptcy filing comes amid severe financial pressures at the franchisee, which has struggled with soaring beef costs and weak customer traffic, while Meritage has also blamed aggressive promotional discounting for squeezing margins.

The Michigan-based operator runs 314 Wendy's locations across 15 states. The company filed its voluntary petition Thursday with the U.S. Bankruptcy Court for the Western District of Michigan, according to court documents.

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The bankruptcy filing came one day after Wendy's franchising unit delivered a Sept. 16 notice seeking to terminate Meritage's franchise rights and lease occupancy "effective immediately," according to court documents. Meritage filed for Chapter 11 the following day, putting the termination effort on hold while the case proceeds. Meritage disputes Wendy's attempt to terminate the agreements and says its franchise rights remain intact.

In a recent report to investors, Meritage CEO Bob Schermer Jr. said store-level earnings declined 48% in 2025. Court filings separately show the company reported a $31.5 million net loss that year, compared with net income of $8 million in 2024, while revenue fell 7.6% to $617.7 million.

In an effort to stem the losses, the franchisee began closing approximately 60 underperforming Wendy's locations in late 2025 and has eliminated or altered breakfast service at numerous locations. The company said those measures are expected to provide approximately $11.2 million in combined annual EBITDA benefits.

Court records show Meritage had approximately $725.9 million in assets and $651.2 million in total liabilities as of summer 2026. The Wendy's franchising unit is asserting claims totaling $146.9 million against the company, including $27.4 million in past-due royalties and fees and $119.5 million in Continuous Operations Fees. Meritage also had approximately $137 million outstanding under its primary credit facility as of the bankruptcy filing.

Ticker Security Last Change Change % WEN THE WENDY'S CO. 6.74 -0.25 -3.58%

In a press release, Meritage's board of directors said the court-supervised restructuring was the "most effective and proactive path to strengthen Meritage’s finances, address these headwinds directly, and protect the long-term interests of its stakeholders, team members, guests, and communities."

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Despite the bankruptcy, Meritage said it intends to keep its dining rooms open and maintain normal restaurant operations. The company has asked the court for permission to continue paying its roughly 9,000 employees without disruption. Court filings put its workforce at approximately 8,850 employees as of the bankruptcy filing.