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, was struggling and closed dozens of restaurants.

Restaurant Brands International, Burger King’s parent company, swooped in and purchased the company as part of its “Reclaim the Flame” initiative.

“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.

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.”