One of Wendy’s largest franchisees has filed for Chapter 11 bankruptcy protections as it struggles to win over customers – falling behind in the burger battle against McDonald’s and Burger King.
Meritage Hospitality, which operates 314 Wendy’s restaurants, one Bojangles and five independently branded restaurants across 15 states, said Thursday that it’s aiming to strengthen its balance sheet.
“Because the substantial majority of Meritage’s restaurant portfolio operates under Wendy’s brand, those system-wide pressures have had a significant impact on the Company’s financial position,” Meritage said in a statement.
Wendy’s has reported same-store sales declines for six straight quarters, suffering as diners focused on value stick with McDonald’s or flee to Burger King, which has been investing in improved eats and better customer service.
The fast-food chain was officially dethroned as America’s No. 2 burger chain by Burger King in August, ending its six-year run just behind McDonald’s.
During an investor conference in June, Meritage CEO Bob Schermer Jr. said store-level earnings before interest, taxes, depreciation and amortization had fallen 48% in 2025. He added that soaring beef prices and an increase in store discounts had weighed on profits.
The company has breezed through a rapid succession of leaders, rotating through three new CEOs since longtime chief Todd Penegor stepped down in 2024 – tumult that has stalled its turnaround efforts.
Wendy’s current CEO Bob Wright said in August that the burger chain is “clearly not performing at our potential,” citing “traffic, our value proposition and franchisee economics.” He announced a new five-point turnaround plan.
The company’s stock has lost two-thirds of its value over the past three years, and is down more than 16% so far this year.
Meritage said it plans to keep its restaurants open during the restructuring process and to continue paying its 9,000 employees wages and benefits.
The franchisee estimated its assets and liabilities are each valued within the $10 million to $50 million range.
Wendy’s franchise business, Quality Is Our Recipe LLC, is Meritage’s top unsecured creditor, with a claim of $24.9 million for deferred fees.
Most recently, the burger chain has tried to claw back customers from rivals by appealing to their nostalgia, announcing plans to re-launch its vintage bright yellow packaging in stores starting Sept. 28.