2 min read- ARC Burger, a major Hardee’s franchisee, filed for Chapter 7 bankruptcy and is liquidating its assets.
- The filing follows a legal dispute over millions in unpaid franchise fees.
- The news follows a recent bankruptcy by a Carl’s Jr. franchisee that led to dozens of closures.
A major Hardee’s franchisee is shutting down operations after filing for Chapter 7 bankruptcy, bringing an ongoing legal dispute with the chain to a turning point.
ARC Burger, LLC, one of the brand’s larger operators, filed for liquidation on April 20. Legal documents reveal that the franchisee owes over $29 million to multiple creditors. And, unlike a restructuring, Chapter 7 bankruptcy means the company plans to sell off its assets and close out its business rather than attempt a comeback.
The filing follows a months-long legal battle between the franchisee and Hardee’s corporate. Last September, the chain terminated its franchise agreement with ARC after it accrued more than $6.5 million in debt from unpaid fees, including royalties.
ARC’s locations were allowed to remain open temporarily while the brand sought a new buyer, provided the franchisee kept up with payments. According to the Hardee’s legal team, ARC rebuffed the chain’s efforts to negotiate a payment plan. Instead, it offered periodic partial payments that did little to offset the growing debt.
Tensions came to a head in November of last year, when Hardee’s filed a lawsuit against ARC for breach of contract. The filing claimed that ARC was not upholding its end of the bargain even though the locations appeared to be turning a profit. “Wherever ARC’s profits are going, they are not being applied to past-due or ongoing fees,” the chain alleged.
And with this bankruptcy filing, it appears that ARC has thrown in the towel. The franchisee owned and operated 77 locations across nine states. While many of these restaurants will be shuttering permanently, Hardee’s corporate is hoping to rescue at least half of them.
A spokesperson told PEOPLE that the chain plans to “assume ownership and resume operations for more than 40 recently closed locations that were previously independently owned and operated by ARC Burger.” So far, it has already reopened nearly two dozen in Georgia, South Carolina, and Mississippi.
This is not the first time that the company has dealt with financial turmoil with its franchisees. Earlier this month, a California-based operator of Carl’s Jr.—the West Coast burger chain belonging to the same parent company—filed for bankruptcy and put 65 locations at risk of closure.
Rising costs, ongoing fee obligations, and disputes with corporate partners can create a difficult balance for operators managing dozens of locations. When that balance tips, the impact is immediate. In ARC Burger’s case, unfortunately, that tipping point has already passed.