Fast-food franchisees have battled economic challenges over the last three years, which have led certain chain operators to close restaurant locations and, in some cases, file for bankruptcy.

Rising costs of operating driven by inflation, such as labor and food, are the top reason many franchisees have faced distress. Other common financial issues blamed for distress include fierce competition among dining chains and consumer reluctance to spend in uncertain times.

Restaurants’ performance declined in June

• Restaurant operators reporting higher annual sales in May 2025: 52%.
• Restaurant operators reporting higher annual sales in June 2025: 49%.
• Restaurant operators reporting sales decline in May 2025: 38%.
• Restaurant operators reporting sales decline in June 2025: 41%.

Red flags were raised in June 2025, as 49% of restaurant operators reported a rise in same-store sales between June 2024 and June 2025, which was down from 52% reporting higher sales in May 2025, according to the National Restaurant Association.

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As for restaurants reporting sales declines, more reported declines in June, with 41% reporting decreased sales, than in May, with 38% reporting declines.

Former Panera Bread franchisee files for Chapter 11 bankruptcy.

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Panera franchisee EYM Cafe of Texas files Chapter 11 bankruptcy  

Former Panera Bread franchisee EYM Cafe of Texas LLC filed for Chapter 11 bankruptcy protection on Aug. 2 after it lost control of its 15 Houston-area Panera franchises in a court judgment.

EYM Cafe of Texas listed up to $50,000 in assets and $10 million to $50 million in debts in its petition filed in the U.S. Bankruptcy Court for the Eastern District of Missouri.

The Irving, Texas-based debtor’s largest creditors include the Internal Revenue Service, owed over $904,000, and the Texas Comptroller of Public Accounts, owed over $124,000.

Panera filed a lawsuit against franchisee EYM Cafe

Panera LLC on May 23, 2025, filed a lawsuit against EYM Cafe of Texas in the U.S. District Court for the Eastern District of Missouri for unauthorized operation of several Panera locations in Texas and unapproved use of its trademarks.

EYM Cafe’s franchise agreements had been terminated in March and May 2025 due to payment defaults, food safety violations, and brand standard breaches, according to Law.com.

Related: Major mattress retailer files Chapter 7 bankruptcy, closes stores

A federal judge ruled in favor of Panera on June 17, issuing a permanent injunction and ordering EYM Cafe of Texas to stop operating under the Panera brand and remove all references to the restaurant brand’s intellectual property by Aug. 21, QSR reported.

The judge’s ruling also imposed a two-year non-compete clause barring EYM owner Eduardo Diaz from owning or advising any competing dining business within five miles of a Panera location.

EYM owner fought lawsuits and filed bankruptcy before

Diaz has a history of fighting lawsuits and filing for bankruptcy on behalf of his companies’ other fast-food restaurant franchises.

EYM Pizza, which at one time operated 142 Pizza Hut locations in Texas, Wisconsin, Ohio, and Indiana, filed for Chapter 11 bankruptcy protection in the Eastern District of Texas on July 22, 2024.

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The debtor sold 77 Pizza Hut locations and closed 65 locations it could not sell in the bankruptcy case. 

The franchisee had also been sued by Pizza Hut after it allegedly stopped paying franchise royalties when a forbearance period ended.

EYM entities that filed for bankruptcy protection

• EYM Cafe of Texas LLC.
• EYM Pizza.
• EYM Chicken.
• EYM King. 

Diaz’s KFC franchisee EYM Chicken closed 25 of its 47 locations in 2024, and his EYM Chicken of Indiana LLC entity filed for Chapter 11 protection in the U.S.Bankruptcy Court for the Eastern District of Texas on June 14, 2025.

Another Diaz franchisee, EYM King, was ordered to close 26 Michigan Burger King locations in March 2023 after the Burger King Corp. terminated EYM’s franchise agreement, according to Restaurant Business at the time.

Burger King had filed a lawsuit against EYM King in February 2023 seeking payment of unpaid royalties, advertisement payments, and other charges.

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