Wendy's Franchisee Meritage Closes 13 More Stores

Meritage Hospitality Group closed 13 more Wendy's restaurants on Friday, October 16, the fourth consecutive weekend of shutdowns for the bankrupt franchisee. That brings its closure count to 33 stores since it filed for Chapter 11 on September 17.

Lawyers for Meritage told a bankruptcy court that the newest batch of closures spans seven states: Florida, Georgia, Oklahoma, North Carolina, Michigan, Massachusetts, and Texas. The stores join 20 restaurants Meritage shut on prior Fridays — 5 on September 25, 5 on October 2, and 10 on October 9.

At the time of its bankruptcy petition, Michigan-based Meritage operated 314 stores, making it one of the biggest restaurant owners in the Wendy's system. The company started as a hotelier and has run Wendy's locations since the late 1990s. It employs around 9,000 people across a footprint spanning 15 states and hasn't said how many jobs the cuts have affected.

Court documents show The Wendy's Company moved to terminate Meritage's franchise agreement before the bankruptcy process began. Since then, the corporate parent has been pushing for more control over which locations stay open.

What does this change for the Wendy's system?

For franchise operators and landlords, the answer is leverage — and it's shifting toward Dublin. A Wendy's spokesperson told Fast Company the company works on a "case-by-case basis" with struggling franchise operators to determine the best path forward.

"While restaurant decisions occur from time-to-time, our goal is to preserve operations, improve restaurant performance and position the Wendy's system for sustainable long-term growth," Wendy's said via email.

Meritage has not replied to requests for comment.

Which stores closed on October 16?

• Oklahoma: 3101 Territory Lane, El Reno; 7716 NW Expressway, Oklahoma City; 200 Shawnee Mall Drive, Shawnee
• Georgia: 8455 Roswell Rd., Atlanta; 165 Scenic Hwy, Lawrenceville; 4234 Highway 29, Lilburn
• Michigan: 1492 US 31 S., Manistee
• Texas: 212 University Ave., Lubbock
• Florida: 13928 Bartram Run Drive, Jacksonville
• Massachusetts: 1340 Springfield Street, Feeding Hills
• North Carolina: 2735 Reynolda Road, Winston-Salem; 3527 Hillsborough Rd., Durham; 1429 Lewisville-Clemons Rd., Clemmons

Meritage has described the closed locations as operating at a loss. The closures stem from cash collateral agreements with its lenders — meaning the banks, not the operator, are effectively dictating the shrinkage schedule.

These shutdowns come on top of roughly 60 restaurants Meritage shuttered before the bankruptcy process even started. Add it up and the franchisee has already shed nearly a third of its 314-store portfolio.

Will more stores close?

Almost certainly. A court filing last week indicated Meritage could close as many as 60 underperforming stores in exchange for access to cash collateral, with closure rounds continuing over the next few Fridays through November 13. For anyone tracking distressed franchise assets, that November date is the one to watch.