Freddy’s franchisee files for bankruptcy. What it means for other restaurants.

A Freddy’s Frozen Custard & Steakburgers franchisee filed for bankruptcy in Kansas after closing 11 stores in the Chicago area since 2024.

M&M Custard filed for Chapter 11 protections Nov. 14 and in an affidavit M&M Custard co-founder and CEO Eric Cole said that the franchisee will be successfully reorganized now that the underperforming stores have been removed from its holdings.

Court records show that the franchisee reported assets of $5.2 million to $27.65 million in liabilities. The company has over 100 creditors.

M&M Custard opened its first Freddy’s franchise in 2012 in Jefferson City, Missouri and held 42 franchises before the Chicago closures. Cole confirmed in an email to USA TODAY Nov. 19 that the company will keep the remaining 31 locations it operates across six states open.

Here’s what to know about the M&M Custard bankruptcy.

M&M Custard acquired three stores in the Chicago area in 2021 after being approached by Freddy’s to develop the market, according Cole’s affidavit. By March of 2024, the franchisee had 11 stores in the market.

Cole said in the affidavit the franchisee had evolved into two “fundamentally different businesses” with the Chicago stores “creating a financial drag” on the company while its 31 “legacy stores” remained profitable.

“The combination of sustained negative EBITDA, limited buyer appetite for underperforming assets, and the increasingly burdensome regulatory and tax environment in Illinois eroded the long-term viability of the market,” Cole said.

The stores began closing in March 2024, with the last one shuttering in October of 2025.

Freddy’s called the bankruptcy an “unfortunate and isolated situation” in a statement to USA TODAY and added that it is working to ensure that the restaurants see “little to no interruption” during the bankruptcy process.

“It is important to note that this filing applies only to this specific franchisee group and is not a reflection of Freddy’s corporate stability or the performance of other franchisees,” the statement reads.

Restaurant trade outlet Nation’s Restaurant News reported that Freddy’s had a stronger 2024 than its burger-chain peers with 6.8% year-over-year sales growth.

This article originally appeared on USA TODAY: Freddy’s franchisee filed for bankruptcy. See impacted stores.