Major Wendy's Franchisee Meritage Files for Bankruptcy

Ben Coley Mon, September 21, 2026 at 4:31 AM PDT 4 min read

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Meritage plans to use the bankruptcy process to consider strategic options to preserve its core Wendy's business.

Meritage Hospitality Group, one of the largest Wendy's franchisees in the U.S., filed for bankruptcy after the burger chain moved to terminate its franchise rights across more than 300 restaurants.

The Grand Rapids, Michigan-based company filed its petitions on September 17 in the U.S. Bankruptcy Court for the Western District of Michigan. Meritage operates 320 quick-service and casual-dining restaurants across 15 states, including 314 Wendy's locations. The company employs approximately 8,850 people.

According to a declaration from Chief Restructuring Officer Kevin Cleary, Wendy's subsidiary Quality Is Our Recipe LLC delivered a notice on September 16—one day before the bankruptcy filing—purporting to terminate all of Meritage's franchise agreements and lease occupancy rights "effective immediately."

Meritage disputes the effectiveness of the notice and contends that the franchise agreements remain in place and are part of its bankruptcy estates.

Claims and Disputes

Wendy's claims Meritage owes approximately:

• $27.4 million in past-due royalties and fees
• $119.5 million in "Continuous Operations Fees"
• Total claimed amount: roughly $146.9 million

Strategic Plans

Meritage plans to use the bankruptcy process to consider strategic options to preserve its core Wendy's business. Those efforts could include:

• Additional restaurant closures
• Sales of underperforming locations
• Strategic market sales to raise liquidity
• Reduction of the portfolio to a sustainable size
• Recapitalization of the balance sheet

The company said it believes it can restructure while preserving jobs and restaurant operations across its footprint.

Company Background

Meritage entered the quick-service industry in 1998 with the acquisition of 28 Wendy's restaurants in Michigan. Beginning in 2009, it completed 28 acquisitions involving 295 Wendy's locations. The company grew to 317 total restaurants by 2018 and has deployed nearly $400 million across its portfolio, including the construction of roughly 100 new restaurants and renovations of older locations.

Meritage's current footprint spans the following states:

• Arkansas
• Connecticut
• Florida
• Georgia
• Indiana
• Massachusetts
• Michigan
• Mississippi
• Missouri
• North Carolina
• Ohio
• Oklahoma
• Tennessee
• Texas
• Virginia

In addition to its Wendy's portfolio, Meritage operates one Bojangles and five independent restaurants under the Morning Belle and Blue Porch Bar & Grill banners in Michigan. The company signed an agreement in July 2025 to develop 15 Bojangles restaurants by April 2031 and opened its first location under the deal in February.

Financial Decline

The bankruptcy followed a sharp deterioration in Meritage's sales and profitability.

Fiscal 2025 vs. Fiscal 2024:

• Revenue declined 7.6% from $668.8 million to $617.7 million
• Same-store sales fell 7.2%
• Swung from net income of $8 million in 2024 to a net loss of $31.5 million in 2025

First Half of 2026 vs. Year-Ago Period:

• Revenue dropped 14% to $273.6 million from $318.1 million
• Same-store sales decreased 8.3%
• Net loss of $23.1 million

The company attributed the pressure to several factors, including:

• Less frequent and less effective Wendy's marketing under prior brand management
• Unusually disruptive winter weather in the South
• Deep discounting at the national level
• Historically high beef costs (average beef cost increased 18.9% year-over-year during the three months ending June 28)

Defaults and Forbearance

Meritage began receiving default notices from its primary lender and Wendy's in the fourth quarter of 2025. The lending defaults included failures to satisfy financial covenants and pay obligations as they came due. Its franchise defaults stemmed from missed required payments.

Wendy's conditionally agreed not to terminate the franchise agreements through August 2026 under a series of agreements beginning in November 2025. Meritage also entered into forbearance arrangements with its lenders.

Those protections expired around August 18. The company continued negotiating for extensions through October, but no agreement materialized before Wendy's issued its termination notice.

Cost-Cutting Measures

Meritage had already begun shrinking its portfolio and cutting costs under Cleary, who was retained in December 2025. Actions included:

• Closure of approximately 60 underperforming Wendy's restaurants beginning in the fourth quarter of 2025 (estimated annual EBITDA benefit: $8 million)
• Elimination or modification of breakfast service at numerous locations (estimated annual EBITDA benefit: $3.2 million)
• Internal restructuring removing $7.3 million in general, administrative, and operational expenses
• Suspension of employer 401(k) match in November 2025

Sale-Leaseback Transactions

• Fiscal 2025: 18 transactions, generating $41.1 million in proceeds ($33.7 million used to reduce debt)
• First half of 2026: 5 transactions, generating $11.3 million

Balance Sheet (as of Summer 2026)

| Item | Amount | |------|--------| | Assets | $725.9 million | | Liabilities | $651.2 million | | Equity | $74.6 million | | Primary credit facility (City National Bank) | $137 million | | Secondary facility (Old National Bank) | $15 million | | Loans from Union Bank | $2.8 million | | Operating lease obligations | $390.8 million |

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