Despite being the third-largest fast-food hamburger chain in the world and the second-largest in the U.S. after McDonald’s, Wendy’s has struggled lately with declining sales and a shrinking store footprint.
This week, another worrying sign suggests that the brand’s troubles are far from over.
One of Wendy’s largest franchisees, Meritage Hospitality Group Inc., which runs 314 Wendy’s locations, is seeking Chapter 11 bankruptcy protection. Here’s what you need to know about the bankruptcy and whether it means even more Wendy’s stores will close.
What’s happened?
On Thursday, Meritage Hospitality Group Inc., a major Wendy’s franchisee, announced it has filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Western District of Michigan.
While Meritage owns a number of restaurants, including five independent concept stores and one Bojangles, the majority of its portfolio includes Wendy’s stores. The company says it currently operates 314 Wendy’s restaurants in 15 states.
The bankruptcy filing comes just months after the company held its annual meeting in June, where it announced that it has closed around 60 underperforming Wendy’s stores.
According to the associated CEO report, “Wendy’s beef inflation, deep discounting (former management team), and marketing misses compressed franchisee store-level margins to a 30-year low.”
The impetus behind those roughly 60 store closures was to help strengthen Meritage’s earnings going forward.
Unfortunately, with the announcement of the company’s Chapter 11 filing this week, it appears that jettisoning underperforming Wendy’s locations has not been enough.
Meritage cites broader Wendy’s struggles
Announcing its bankruptcy, Meritage did not paint Wendy’s as an especially healthy brand.
“The filing follows a candid assessment of the financial pressures facing the company, including the sustained system-wide headwinds affecting the broader Wendy’s brand over the past few years,” Meritage said in a statement.
“Because the substantial majority of Meritage’s restaurant portfolio operates under the Wendy’s brand, those system-wide pressures have had a significant impact on the company’s financial position,” it added.
Headwinds impacting the Wendy’s brand should come as no surprise to anyone who’s followed the restaurant chain over the last few years.
As Fast Company reported in May, The Wendy’s Co. announced a 2025 turnaround plan aimed at improving profitability. As part of that plan, Wendy’s announced hundreds of closures of company-owned locations.
Wendy’s has faced many of the same pressures that other fast-food restaurants have: declining foot traffic, price-conscious customers, and rising operating costs.
But efforts to counteract this, including store closures and broader turnaround efforts, seem far from materializing, based on the company’s most recent Q2 2026 results.
In August, the company reported its second-quarter financials, in which global systemwide sales fell 6.5% versus the same quarter a year earlier. The numbers were even worse in its U.S. market, where national sales fell 8.2%.
Announcing the disappointing numbers, Wendy’s president and CEO Bob Wright acknowledged, “Today we are clearly not performing at our potential.”
Reached for comment about Meritage’s Chapter 11 filing, a spokesperson for Wendy’s said, “Our focus remains on serving our customers, supporting our franchise system, and strengthening the long-term health of the brand.
“We partner closely with franchisees that are experiencing challenges to support them and evaluate each situation on a case-by-case basis to identify the best and most sustainable path forward,” the statement added.
What does Meritage’s bankruptcy mean for Wendy’s store closures?
It’s important to note that Meritage Hospitality Group is not going out of business.
Filing for Chapter 11 bankruptcy gives Meritage the ability to continue operating while it reorganizes its finances and, as the company noted, “establish a sustainable capital structure that positions Meritage for long-term success.”
It should also be noted that despite closing around 60 underperforming Wendy’s locations before the bankruptcy filing, Meritage did not say it intends to close additional stores.
“The company anticipates maintaining restaurant-level operations during the restructuring process and intends to continue paying its approximately 9,000 team members their wages and benefits without interruption,” Meritage said.
Meritage is a publicly traded company, but it trades on the over-the-counter (OTC) OTCQX market under the ticker MHGU. Year to date, the company’s stock price has fallen by more than 92% as of the time of this writing.
As for Wendy’s parent company, shares in The Wendy’s Co. (NYSE: WEN) are down more than 16% in the same period, to $6.89. The stock is trading at a low it has not seen since 2013.