Dave's Hot Chicken Franchisee Files Chapter 11, Countersues Bank Midwest

A Dave's Hot Chicken franchisee filed for Chapter 11 bankruptcy and countersued its lender, weeks after Bank Midwest sued an affiliate of the group for defaulting on a $20 million loan.

TIG Reaper and three related entities filed for Chapter 11 in Pennsylvania on September 21, according to court documents. The entities are subsidiaries of The Integritty Group, known as TIG, which also operates Qdoba, Checkers and The Greene Turtle Sports Bar and Grille locations. The group's principals are Raj Mahadevia, Jiger Patel and Pranav Desai.

Only TIG's Dave's Hot Chicken operations are part of the bankruptcy. The group runs seven Dave's stores across New Jersey, Pennsylvania and Delaware and has three more in "late stages of development," according to court filings.

"We have built our businesses over many years through hard work and by honoring our commitments, and we intend to keep doing exactly that," Patel told Franchise Times over email on Monday. "The bank's lawsuit tells one side of the story. Today, we filed our complaint against the bank, which tells our side of the story, and we look forward to getting to the truth and vindicating ourselves in court. We have every confidence in the process and the outcome, and we are grateful to our employees, franchise partners, friends, and customers for their continued support."

TIG listed between 100 and 199 creditors, with liabilities between $10 million and $50 million, in its filing with the United States Bankruptcy Court for the Eastern District of Pennsylvania. Its assets fall in the same range. Its largest debts are to Bank Midwest, totaling nearly $8.75 million.

The loan at the center of the dispute dates to August 2024, when Bank Midwest lent TIG Reaper $1.65 million and $8.35 million. TIG agreed to the appointment of a receiver for its Qdoba subsidiaries, and the bank is now allegedly using that agreement "as a basis for the appointment here despite the fact that Bank Midwest has been paid current and the Debtor Entities are not in any payment default," Patel wrote in the bankruptcy filing.

The $30 million sale that collapsed

Alongside the Chapter 11 filing, TIG sued Bank Midwest for breach of contract and for interfering with a roughly $30 million sale of its Dave's business. That offer "would have been more than sufficient to retire" the group's debts to Bank Midwest, according to court documents.

The bank declared a default before the sale could close, which "undermined the market" for TIG's restaurants, the filing states. The buyer cut its offer in half, and "further efforts to sell the businesses have been stymied by the improper defaults, deterring potential buyers or giving the appearance of a 'fire sale' rather than an orderly sale of a growing business."

"In sum," the complaint stated, "this matter concerns an aggressive lender who, acting in bad faith, manufactured (non-monetary) defaults and seized on ambiguities within its own loan documents to strongarm [TIG] into paying debts owned by separate businesses."

Bank Midwest would not allow the sale unless TIG agreed to turn over the profits through a forbearance agreement, the complaint alleged.

Cash advances deepen the squeeze

Beyond traditional loans, TIG received $305,000 in merchant cash advances from three lenders, according to the bankruptcy filing. MCAs are repaid through a percentage of future sales — business owners effectively sell part of their revenue in return for upfront cash rather than paying interest.

Bankruptcy attorney Alex Mattera said earlier this year that such advances give operators quick access to cash but carry hefty fees. "It creates an incredible liquidity crunch for these smaller operators," Mattera said. Bankrupt franchisees of Farmer Boys, Domino's and Del Taco each cited MCAs as a reason for declaring bankruptcy this year.

To keep operations running during the bankruptcy period, TIG's principals provided a $200,000 debtor-in-possession loan, court documents state.

Dave's Hot Chicken, which is not directly involved in the filings, said in a statement that "the situation does not involve the broader Dave's Hot Chicken franchise system. The affected restaurants remain open, and Dave's Hot Chicken remains focused on maintaining its brand standards and delivering the experience guests expect across its system."

TIG is far from alone. Major operators of Carl's Jr., Popeyes, Applebee's, Hardee's, Wendy's and Moe's Southwest Grill have all declared bankruptcy this year, citing merchant cash advances, inflationary pressure and legal struggles. The Pennsylvania court will now decide whether TIG's Dave's stores get the orderly sale its principals say the bank denied them.