The franchise model comes with risks and rewards for restaurants.

On the positive side, a chain can expand quickly without spending significant capital. That, however, comes with the risk that a franchise operator will struggle, or even fail, damaging the perception of the brand.

That happened to Burger King in 2024 when Carrols Restaurant Group, one of its largest franchise operators, filed for Chapter 11 bankruptcy and closed dozens of restaurants.

Restaurant Brands International, Burger King’s parent company, swooped in and purchased the company out of Chapter 11.

“With the close of the acquisition, RBI adds the largest Burger King franchisee in the United States to its portfolio as part of the company’s Reclaim the Flame plan. As previously announced, the Company will invest a further $500M to accelerate the reimaging of more than 600 Carrols restaurants before refranchising the majority of the acquired portfolio to new or existing smaller franchise operators over the next seven years,” the company shared in a press release.

Taking that step assured the public and investors that while Carrols had struggled, Burger King itself was healthy and in expansion, not contraction, mode.

Now, a key Burger King and McDonald’s rival, Carl’s Jr., finds itself in a similar position as one of its largest franchise operators has filed for Chapter 11 bankruptcy protection.

Carl’s Jr. franchisee files for Chapter 11 bankruptcy protection

Friendly Franchisees Corporation, filed for Chapter 11 bankruptcy protections through the U.S. Bankruptcy Court in the Central District of California, according to documents filed on PacerMonitor.

The company filed for bankruptcy under various subsidiaries, including Senior Classic Leasing, DFG Restaurants, and Second Star Holdings.

As a Carl’s Jr. operator, the company operates 65 restaurants across California, a state with more than 575 locations of the fast-food burger chain.

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Carl’s Jr. shared a statement making it clear that this was an isolated franchisee, not a broader problem.

“This situation is specific to this individual franchisee’s financial and business circumstances,” a company spokesperson told Restaurant Dive. “This has no impact on the operations of any other Carl’s Jr. locations, and we remain committed to delivering quality experiences for our guests, while driving profitable, sustainable growth for our franchisees and brand.”

Carl’s Jr. franchisee Chapter 11 at a glance:

• Senior Classic Leasing, LLC – Chapter 11 (CA Central): Filed a voluntary Chapter 11 petition in the U.S. Bankruptcy Court for the Central District of California (Case No. 8:26‑bk‑11058) on April 2, 2026, according to PacerMonitor.
• DFG Restaurants, Inc. – Chapter 11 (affiliate of Carl’s Jr. franchisee):Filed a Chapter 11 petition on April 2, 2026, in the Central District of California, along with affiliated entities, as part of the same franchisee bankruptcy group, reported PacerMonitor.
• Second Star Holdings, LLC – Chapter 11 (affiliate of Carl’s Jr. franchisee):Also filed for Chapter 11 on April 2, 2026, in the U.S. Bankruptcy Court for the Central District of California as part of the same group of affiliated debtors, according to PacerMonitor filings.
• Affiliated filings in the same bankruptcy grouping: The Chapter 11 filings include Sun Gir Inc. and Third Star Investments LLC, in addition to the three entities above, all associated with Friendly Franchisees Corporation (Carl’s Jr./Hardee’s operator), according to Restaurant Business Online.
• Business context: These filings are part of a bankruptcy for a 65‑unit Carl’s Jr. franchisee operating throughout California, representing one of the largest single franchisee reorganizations in the brand’s history, according to Restaurant Business Online.

Carl’s Jr. locations make less than McDonald’s and Burger King restaurants.

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Fast-food franchisees have struggled

The Carl’s Jr. franchisee and Carrols filings are not unique.

“In recent years, a number of major fast-food franchise owners have filed for bankruptcy. This includes the November 2023 bankruptcy filings for Wendy’s franchisee Starboard Group and Burger King franchisee Premier Kings. And last April, another major Burger King franchisee, Consolidated Burger Holdings, also filed for Chapter 11 protection,” Fast Company reported.

Filings are not limited to franchise operators.

“Restaurants that exist today may not exist in five years. They’ll be off the map,” bankruptcy attorney Daniel Gielchinsky told Fox Business. “Additionally, consumers will “see a lot of restaurants with a decreased footprint.”

Rising costs and declining demand have hurt restaurant operators. Labor, food, and rent have all been climbing.

“All of those pressures that the franchisees are citing as causing problems with their operating economic models show really no sign of slackening their impact as you move into 2024,” Eric Danner, a partner in CohnReznick’s restructuring and dispute resolution practice, told Restaurant Dive. 

Carl’s Jr. restaurants are not as successful as many of its key rivals.

“In 2025, Carl’s Jr. has an estimated average unit volume of $1.4 million according to Circana’s Definitive U.S. Restaurant Ranking 2026. That’s much less than half of the AUV estimated at McDonald’s, but just under Burger King’s $1.6 million AUV. Circana estimated that Carl’s Jr. consumer spend fell by 4% to just over $1.4 billion and that its location count dropped by 3% in 2025,” Restaurant Dive reported. 

Related: 93-year-old sandwich chain has closed half of its restaurants