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A major Carl’s Jr. franchisee that operates 65 locations across California has filed for Chapter 11 bankruptcy protection.
Multiple companies owned by Harshad Dharod, CEO of Friendly Franchisees Corporation, the group behind those restaurants, submitted filings late last week in the Golden State, Restaurant Business reports. The entities include Sun Gir, Inc., Senior Classic Leasing, DFG Restaurants, Second Star Holdings and Third Star Investments, the outlet added.
Sun Gir, Inc. has asked the court to consolidate the cases into a single proceeding, a routine move when related businesses file at the same time, according to the outlet. Doing so allows the court to oversee the restructuring more efficiently, rather than handling each case separately.
Each entity reported less than $50,000 in both assets and liabilities, according to court documents obtained by Restaurant Business.
There are currently more than 1,000 Carl’s Jr. locations across the U.S., with about 62 percent, or over 600, in California alone.
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More than 600 of Carl’s Jr. 1000 locations are in California (Getty Images)
By filing for Chapter 11, the companies aim to restructure their debts while continuing to operate. The process gives the franchisee a chance to stabilize financially as it works through the bankruptcy under court supervision.
A spokesperson for Carl’s Jr. said that the bankruptcy is isolated to this specific franchisee and does not reflect the overall health of the brand or its other locations.
“We are aware that Carl’s Jr. franchisee Harshad Dharod entities and its affiliates, which together independently own and operate certain Carl’s Jr. restaurants in California, have entered into a court-supervised restructuring process under Chapter 11 of the United States bankruptcy code,” a representative told Restaurant Business. “This situation is specific to this individual’s financial and business circumstances.”
“This has no impact on the operations of any other Carl’s Jr. locations and we remain committed to delivering quality experiences for our guests, while driving profitable, sustainable growth for our franchisees and the brand,” the statement ended.
The Independent has contacted Carl’s Jr. for comment.
The filings add to growing signs of strain among restaurant franchise operators, many of whom have been grappling with rising labor costs, higher food prices, and shifting consumer spending habits.
In California, the pressure is even greater due to a new law requiring fast-food workers to earn at least $20 an hour. That higher wage has forced many operators to raise menu prices, making it harder to attract customers while still covering rising costs.
At the same time, Carl’s Jr. has been struggling with declining performance. Alongside its sister chain Hardee’s, the brand saw U.S. sales drop 6 percent to about $1.4 billion last year, while average sales per location fell 2.7 percent to roughly $1.4 million, according to Technomic, Restaurant Business reports.