Wendy’s Objects to Bankrupt Franchisee Operating Remaining Restaurants
Wendy’s, through its subsidiary Quality Is Our Recipe (QIOR), has filed an objection in a Chapter 11 bankruptcy case against Meritage Hospitality Group. The franchisor claims that the bankrupt franchisee no longer holds rights to operate Wendy's restaurants after QIOR terminated their agreement on September 16 due to over $27 million in unpaid obligations, including royalties and advertising fees. Meritage filed for bankruptcy protection just one day later, seeking first-day motions to continue operations. However, Wendy’s argues that allowing Meritage to keep running the remaining 314 units would violate legal agreements and harm estate resources without benefitting creditors or debtors. QIOR has proposed a short-term license if granted, enabling Meritage to wind down its business while restaurants are transferred. Meritage cited declining revenue, rising beef prices, ineffective marketing, poor weather in the South, and margin pressures from deep discounting as reasons for financial distress.