A Carl’s Jr. franchisee that operates dozens of locations in California has declared bankruptcy, according to court filings this week.
Several entities operated by Harshad Dharod, the owner of Friendly Franchisees Corp. (FFC), which operates 65 locations of the fast-food burger chain in California, sought Chapter 11 bankruptcy protection late last week. They include Sun Gir, Inc., Senior Classic Leasing, DFG Restaurants, Second Star Holdings and Third Star Investments, according to court filings.
Sun Gir is asking a court to manage each of those cases together.
Each of the cases list both assets and liabilities as less than $50,000.
Representatives for the franchisor blamed the bankruptcy filings on operator-specific challenges.
“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 company representative said in an emailed statement. “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.”
FFC touts itself as the largest California-based operator of Carl’s Jr. restaurants. The franchisee acquired those restaurants in 2000.
Yet the past couple of years have been difficult on restaurant operators. Fast-food restaurants have lost customers frustrated by price increases while their own costs for food and labor continue to increase.
Several restaurant companies have filed for bankruptcy over the past couple of years, including large franchisors like Fat Brands and franchisees of chains like Applebee’s and Del Taco.
In California, where Dharod’s restaurants are located, fast-food chain restaurants are required to pay workers at least $20 an hour. That has created some challenges for operators in the state that have had to increase prices further.
Carl’s, which with sibling chain Hardee’s is based in Tennessee, saw its U.S. system sales decline 6% last year to $1.4 billion, according to Technomic. The chain’s unit volumes average $1.4 million, down 2.7%.
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