Ten Wendy's Stores Face Closure After Judge Denies Emergency Hearing

Ten more Wendy's restaurants are set to close after a bankruptcy judge on Thursday denied Wendy's request for an emergency hearing to block the shutdowns. The stores, listed in a court filing by The Wendy's Company, were scheduled to close on Friday, October 9.

The closures are the latest move by Meritage Hospitality Group, one of Wendy's largest franchisees, which filed for Chapter 11 protection in mid-September. Meritage is closing at least 30 locations—roughly 10% of its 314-restaurant fleet—under a cash collateral deal, with the final tranche slated for Friday, October 16. It has already shut 10 stores over the past two weekends.

Why did Wendy's go to court?

Wendy's lawyers told the court this week that the company tried to stop the permanent closure of seven specific restaurants. In a docket filed Wednesday, Wendy's said it proposed swapping those locations out of the closure list and substituting stores it deemed more suitable for shutdown. Meritage rejected the offer.

Wendy's said it even offered to cover any losses Meritage might incur from the swap. Meritage still refused—and gave no reason for the rejection.

"[The] refusal falls outside the scope of reasonable business judgement," Wendy's said in the filing, invoking the standard bankruptcy courts use to decide whether to permit actions such as closing stores or canceling leases.

A judge denied the emergency hearing request on Thursday, clearing the way for the closures. Reached for comment by Fast Company, a Wendy's spokesperson described bankruptcy-related store closures as routine and declined to elaborate on the legal dispute.

"Our focus remains on serving our customers, supporting our franchise system and strengthening the long-term health of the brand," Wendy's said in a statement. "The goal is to keep as many restaurants open as possible while strengthening the Wendy's system for the future."

Meritage did not respond to a request for comment.

Which stores are closing?

The 10 stores on Meritage's list sit across four states, according to Wendy's Thursday filing. Seven of them are the exact locations Wendy's tried to save:

• Michigan: Grosse Pointe Farms
• Michigan: Hudsonville
• Georgia: Windy Hill
• Florida: Commonwealth
• Florida: Heckscher
• Oklahoma: Moore
• Oklahoma: Choctaw

Three additional Oklahoma restaurants—I40 & MacArthur, 178th and Western, and Rockwell and Memorial—are also slated for closure. Wendy's did not dispute those three.

The stores appeared to still be open as of early Friday, though employees reached by phone declined to comment. The list could change; Meritage has not confirmed its plans. If the pattern holds, the franchisor expects the operator to move quickly—Meritage has closed a wave of stores on each of the last two Fridays.

What's behind the Wendy's–Meritage fight?

The store-closure standoff marks an escalation in an increasingly hostile dispute between Wendy's and a franchisee that has operated its restaurants for almost 30 years.

Meritage's bankruptcy was triggered after Wendy's issued a franchise termination notice in mid-September. Wendy's claims it is owed more than $146 million in past-due royalties and other fees.

Meritage has disputed the legitimacy of the termination and blamed its financial distress on Wendy's itself. The franchisee has attacked Wendy's marketing as ineffective and said discount-heavy national promotions squeezed its profits. Wendy's, for its part, reasserted in a court filing this week that it considers Meritage a "former" franchisee with no right to operate the restaurants.

The conflict plays out against a weak backdrop for the burger chain's owner. Shares of The Wendy's Company (NYSE: WEN) are down 72% over the last five years. The company reports third-quarter earnings on November 5—an event likely to bring fresh scrutiny of how much damage the franchise fight is doing to the brand.