Carl's Jr. franchise in bankruptcy liquidating 49 stores

28 May 2026, 20:00 · The Fresno Bee

When you sell franchises, you run the risk of the franchise operator's problems making it look like you have a struggling brand. Burger King, for example, in 2024 saw Carrols Restaurant Group, one of its largest franchise operators, close dozens of restaurants.

The franchise operator blamed rising costs for its struggles.

"Both labor and commodity costs routinely spike for one reason or another. But it rarely happens at the same time. Food and labor are the two biggest costs for any restaurant, and inflation is driving up prices at record levels," Nation's Restaurant News reported, noting that those issues were not unique to Carrols Restaurant Group.

After the franchise operator filed for Chapter 11 bankruptcy protection, Restaurant Brands International (RBI), Burger King's parent company, swooped in and purchased the company as part of its "Reclaim the Flame" initiative.

"With the close of the acquisition, RBI adds the largest Burger King franchisee in the United States to its portfolio as part of the company's Reclaim the Flame plan.," the company shared in a press release.

Taking that step assured the public and investors that while Carrols had struggled, Burger King itself was healthy and in expansion, not contraction, mode. RBI plans to refranchise those locations after they have been remodeled.

Not every franchise operator has the means to step in when a franchisee falters. Carl's Jr., for example, has seen one of its largest franchisees file for Chapter 11 bankruptcy, and now, those restaurants are being sold.

Carl's Jr. franchisee filed for Chapter 11 protection

Carl's Jr. franchisee Sun Gir Inc., and five affiliates filed their petition in the U.S. Bankruptcy Court for the Central District of California on April 2, according to documents posted on PacerMonitor.

Sun Gir, which operates 65 Carl's Jr. franchises in California, is the lead Chapter 11 case among the affiliates.

The company blamed the bankruptcy on a California labor law.

"Carl's Jr. operator Friendly Franchisees Corporation said California's $20 fast food sector minimum wage was one of the reasons that it ended up in financial distress ahead of its April Chapter 11 bankruptcy filing, CEO and Founder Harshad Dharod said in a court filing under subsidiary Sun Gir," Restaurant Dive reported.

More Restaurants

Carl's Jr. shared a statement with Restaurant Dive, asserting that the Sun Gir bankruptcy was an isolated situation involving the individual franchisee and not a broader problem within the Carl's Jr. chain.

"This situation is specific to this individual franchisee'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 franchises and brand," the company shared.

Carl's Jr. operates in 15 states. Shutterstock

Sun Gir Carl's Jr. locations are being sold

National Franchise Sales (NFS), a firm which specizlizes in liquidations, has been hired to manage the marketing and sale process for 49 Carl's Jr. restaurant locations operated by Sun Gir Incorporated and affiliated entities as part of an ongoing Chapter 11 restructuring proceeding.

"The offering represents a significant multi-unit quick-service restaurant portfolio within a well-established brand system and highly competitive California market. The sale process is designed to attract qualified operators and strategic buyers capable of continuing long-term operations and leveraging the scale and geographic clustering of the portfolio," according to an email NFS shared with TheStreet.

In theory, the restaurants could still operate under the Carl's Jr. brand, but the company would have to grant a new franchise operator license.

NFS plans to sell the restaurants to an experienced franchise operator.

"Our objective is to maximize value through a structured, court-supervised process while creating opportunities for qualified operators and strategic buyers across California," said Michael Ingram, Lead Advisor for the NFS Asset Recovery Team.

Carl's Jr. could pull the franchises

The company is in default of its franchisee agreements at a number of locations, because of a "failure to timely pay rent, royalties and other required charges," per the bankruptcy filing. These defaults could result in the termination of those agreements, which would cost Sun Gir the ability to operate and generate revenue.

Because the company is under Chapter 11 bankruptcy protection, Carl's Jr. would have to work through the courts if it chooses to terminate its franchise agreement.

The exact status of the franchise relationship and whether it will continue after the restaurants are sold depends upon the exact language in the franchise contract.

Even where a debtor is not assigning a franchise agreement, assumption without franchisor consent is barred in the Ninth Circuit," law firm Pillsbury Winthrop Shaw Pittman LLP wrote in a recent bankruptcy analysis.

That gives franchisors in the Ninth Circuit, which includes California, significant leverage over whether distressed franchisees can continue operating under existing agreements.

"Federal bankruptcy law may actually provide significant leverage to franchisors and suppliers."

Carl's Jr. ultimately controls whether the restaurants remain in its franchise system, giving the chain significant leverage as the bankruptcy sale process moves forward.

The Arena Media Brands, LLC THESTREET is a registered trademark of TheStreet, Inc.

This story was originally published May 28, 2026 at 1:00 PM.