Wendy’s is locked in a high-stakes court fight with one of its biggest U.S. franchisees, and 314 restaurants sit at the center of the dispute.
Meritage Hospitality Group filed for Chapter 11 bankruptcy protection on September 17, 2026. Just one day earlier, Wendy’s subsidiary Quality Is Our Recipe LLC sent Meritage a notice terminating its franchise agreements “effective immediately.” Wendy’s now argues that bankruptcy cannot restore rights that disappeared before the case began.
The Grand Rapids, Michigan-based restaurant operator says its franchise agreements remain active and became property of its bankruptcy estate. That disagreement leaves the court with a critical question: Can Meritage legally continue operating hundreds of restaurants carrying the Wendy’s name?
The answer could shape the future of roughly 5% of Wendy’s U.S. restaurant system. Meritage currently operates 314 Wendy’s locations across 15 states, along with one Bojangles and five independently branded restaurants. The company also employs about 9,000 people.
Wendy’s Says Meritage Lost Its Franchise Rights Before Bankruptcy
In its objection to Meritage’s first-day bankruptcy motions, Wendy’s argued that Meritage no longer has the legal right to operate its 314 Wendy’s restaurants. The company says the franchise agreements were properly terminated before the bankruptcy petition arrived.
That timing is crucial because Chapter 11 normally gives a debtor powerful protections. The automatic stay generally stops creditors from pursuing many collection actions after a bankruptcy case begins. It does not necessarily reverse a contract termination that became effective before the filing.
So, the fast food restaurant chain argues that Meritage entered bankruptcy without active Wendy’s franchise rights. According to Restaurant Dive’s account of the court filing, Wendy’s said the debtors have “no rights to operate” because the agreements were terminated before the petition.
Money is also driving the fight. Wendy’s claims Meritage owes $27.4 million in past-due royalties, advertising payments and other fees. The franchisor is also seeking about $119.5 million in continuing operations fees connected with restaurant closures, bringing the asserted claims to roughly $146.9 million.
Meritage closed around 60 underperforming Wendy’s restaurants during an earlier restructuring effort. Those closures form a major part of the financial dispute now playing out in bankruptcy court. Wendy’s says the termination did not come without warning. The burger chain said it had spent more than a year working with Meritage and its lenders in search of a workable solution.
“We worked with this franchise organization and its lenders for more than a year to find a sustainable path forward,” the fast food giant said after the bankruptcy filing. The company added that it ultimately decided termination was “the appropriate course of action.”
Meritage Says the Restaurants Can Keep Operating
The company’s business depends heavily on Wendy’s restaurants. So, losing the right to operate all 314 units would dramatically change what remains available to reorganize.
Meritage entered Chapter 11 with about $725.9 million in assets and $651.2 million in liabilities, according to court-related reporting. The company said it filed bankruptcy to strengthen its balance sheet and create a more sustainable capital structure.
The restaurant operator has also said it plans to maintain normal operations during the restructuring. Meritage intends to continue paying employee wages and benefits, subject to court approval of its bankruptcy motions.
For customers, that means the filing itself does not automatically close all 314 Wendy’s restaurants. Meritage wants the locations to remain open while the company restructures its debts and considers its next moves.
Meritage is already trying to shrink its footprint. The company has closed dozens of weaker restaurants as it searches for ways to improve profitability. Restaurant Dive reported that the operator closed at least 60 units before bankruptcy and changed other parts of its business to improve store-level earnings.