Freddy’s franchisee files Chapter 11 bankruptcy

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M&M Custard, a prolific Freddy’s Frozen Custard & Steakburgers franchisee, has declared Chapter 11 bankruptcy successful the U.S. Bankruptcy Court for the District of Kansas. 

The company, based successful Overland Park, Kan., operates 42 locations crossed six states, including Missouri, Kansas, Illinois, Indiana, Kentucky, and Tennessee.

In 2021, Freddy’s corp approached M&M Custard with an connection to get underperforming corporate-owned stores successful the Chicago marketplace for $1 million. The woody besides included rights to further grow successful the market, and M&M Custard targeted 13 further locations for development.

However, the marketplace continued to beryllium a challenge, and M&M Custard’s bankruptcy petition shows reported assets of $5.2 cardinal versus liabilities of $27.7 cardinal to much than 100 creditors. 

In the tribunal filing, M&M Custard managing subordinate Eric Cole wrote, “Despite targeted expansion, operational improvements, and accrued marketplace awareness, the Chicago marketplace has struggled to summation sustainable traction, raising important concerns astir its semipermanent viability.” 

M&M Custard opened its archetypal Freddy’s successful Missouri successful 2012 and said it consistently ranks among the company’s apical franchisees for performance, size, and mean portion volumes. As outlined successful the petition, the franchisee divided M&M holdings into 2 businesses — its 31-unit bequest business, and its Chicago business, which it refers to arsenic “a toxic plus generating antagonistic (earnings earlier interest, taxes, depreciation, and amortization), and creating a fiscal resistance connected the wide business.” 

The franchisee is seeking to determination connected with its bequest business, portion rejecting leases for the Chicago locations, stating without the “drag from the Chicago stores, the concern tin beryllium successfully reorganized.” The institution has besides requested alleviation to assistance stabilize currency travel portion it reorganizes. 

Freddy’s Frozen Custard & Steakburgers had a comparatively beardown 2024 compared to galore of its burger peers, with year-over-year income maturation of 6.8% and portion number maturation of 6.4% to decorativeness with 550 locations. Its mean portion volumes past twelvemonth were $1.9 million. 

Contact Alicia Kelso astatine [email protected]

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