Wendy’s has signed a letter of intent to buy up to 163 restaurants from Meritage Hospitality Group, one of its largest franchisees, which is in Chapter 11 bankruptcy. Wendy’s disclosed the plan with its third-quarter results.
The deal is not final. It still needs a definitive agreement, and it remains open to higher offers and approval from the bankruptcy court.
What the letter of intent covers
Wendy’s announced the letter of intent with Meritage and its lenders when it reported third-quarter results, according to the earnings release on Franchising.com. The deal covers up to 163 restaurants, and the release says it is subject to a definitive agreement, potential higher offers and court approval.
Meritage is also exploring a sale or recapitalization of its other markets, the release said. Wendy’s described portfolio actions that include buying restaurants itself and shifting franchised locations to stronger operators.
Wendy’s says the plan is part of a broader effort to put restaurants in the hands of stronger operators. The company has said it is pursuing planned acquisitions and transfers of franchised locations. The Meritage restaurants would fit that approach.
The word “up to” matters. A letter of intent signals a plan, not a completed purchase, and the final count could end up lower if a deal comes together in pieces.
Chains of every size have faced pressure lately, and readers can see how some of today’s biggest names began in a look at 12 fast-food chains from the 1950s, while nine diner classics Americans still order covers the sit-down side. Tips on dining etiquette are another handy read.
Why Meritage is in bankruptcy
Meritage Hospitality Group, based in Grand Rapids, Michigan, filed for Chapter 11 on September 17, according to Nation’s Restaurant News. The company once operated 374 Wendy’s restaurants. Another 60 closed earlier this year, before the filing.
The trade publication reported that 33 restaurants have closed since late September, including 13 in a single week. Court documents say up to 60 more could close through mid-November. Lenders hold $155 million in secured debt.
Closings like these ripple through neighborhoods. For a lighter look at life inside a dining room, see a list of outrageous reasons people were kicked out of restaurants. The restaurants slated to close have low sales, with some under $900,000 in annual revenue, less than half the Wendy’s system average. Each has negative earnings before interest, taxes, depreciation and amortization, and some lost nearly $200,000 over the past 12 months. Closing them is meant to improve profitability and preserve cash for lenders.
Under the federal courts’ summary of Chapter 11, a business that files can keep operating and may sell property with court approval, which is the route a sale to Wendy’s would take.
A turnaround that is still unproven
The Meritage news arrived alongside weak quarterly numbers. Wendy’s reported that systemwide sales fell 5.9% globally in the quarter ended September 27, and that same-restaurant sales in the United States fell 5.7%. Net income was $15.1 million, down 65.9%, and adjusted earnings before interest, taxes, depreciation and amortization were $113.4 million, down 17.8%.
The release gives no numeric guidance for the year. Chief executive Bob Wright said the company is moving forward with focus and urgency to bring Wendy’s to its full potential. The company is pursuing a multi-year plan called Dave’s Way, built around traffic, market share and restaurant profitability.
Breakfast is one place where the company is rethinking its menu. Fans of the morning daypart may want to browse a list of breakfast classics that deserve a comeback, since the chain says it will decide location by location whether to keep serving it.
.jpg?width=1600)
Trian, closures and breakfast
Wendy’s has also rejected an unsolicited takeover proposal. According to a company announcement, a group led by Trian Fund Management offered $7.35 per share in cash, and the board’s independent committee unanimously rejected it as substantially undervaluing the company. The board also approved a one-year shareholder rights plan on November 4. Background on the firm is on Wikipedia’s Trian entry.
Nation’s Restaurant News reported that Wendy’s has closed a net of more than 300 locations since 2024, including 245 net closures in the first half of this year. Many were meant to improve franchisee profitability.
Management also plans to handle breakfast location by location. The company estimates the change could unlock up to $200 million in restaurant-level earnings across the system.
What it means for customers
For customers, a sale to Wendy’s or another operator would likely mean that a restaurant stays open under the same sign, rather than going dark. Closures that are already planned are a separate matter, and the filings say some low-sales locations will shut either way.
Franchising is the model behind most restaurant chains. Under Wikipedia’s overview of franchising, a company licenses its brand and methods to independent operators, who run the stores and pay fees. That structure spreads risk, but it also means a franchisee’s money trouble can reach the brand, as this case shows.
Wendy’s itself was founded by Dave Thomas on November 15, 1969, in Columbus, Ohio, according to Wikipedia’s Wendy’s entry. It is known for square hamburger patties and the Frosty, a thick frozen dessert. The chain’s own website lists menus and locations.
Wendy’s says it has the financial capacity to fund its turnaround plan, according to its chief financial officer, Steve Cirulis. The company declared a quarterly dividend of 7 cents per share, payable December 15.
The next steps will come in court filings. A definitive agreement, any competing bids and a judge’s approval would settle which restaurants Wendy’s gets and which are left to close.
This article was produced with AI assistance and edited for accuracy against the sources linked above.
Image: Harrison Keely – CC BY 4.0/Wikimedia Commons
