M&M Custard, a major franchisee of Freddy’s Frozen Custard & Steakburgers, filed for Chapter 11 bankruptcy protection on Friday. The filing occurred in the Bankruptcy Court for the District of Kansas. Legal representatives for the company were contacted by Newsweek for further comment.
Current State of the Fast-Food Industry
The fast-food and fast-casual restaurant sectors are facing significant challenges. Many chains have reported declines in sales and traffic this year. Economic difficulties have particularly affected lower- and middle-income consumers in the U.S. This trend has contributed to a wave of bankruptcies and closures in the restaurant industry.
Financial Details of the Filing
- Assets: $5.2 million
- Liabilities: $27.7 million
- Creditors: Between 100 and 199
The bankruptcy filing indicates that M&M Custard will have available funds to pay its unsecured creditors. The company filed for bankruptcy along with 31 affiliate locations, all of which are expected to continue operations during the reorganization process. Notably, this bankruptcy case involves only the franchisees and not the parent company.
Operational Footprint
M&M Custard operates numerous Freddy’s locations across several states, including:
- Missouri
- Kansas
- Illinois
- Indiana
- Kentucky
- Tennessee
Other chains, including Dairy Queen, have also faced closure of multiple locations this year. Dairy Queen, specifically, has shut down dozens of its restaurants due to ongoing legal disputes between franchisees and corporate headquarters regarding royalty fees and required remodels.
Industry Insights
Recent statements from industry leaders reflect the broader challenges facing the restaurant business. McDonald’s CEO Chris Kempczinski noted a decline in quick-service restaurant traffic among lower-income consumers, which has been notable for nearly two years. In contrast, higher-income consumers continue to show strength in restaurant traffic.
Similarly, Chipotle’s CEO Scott Boatwright highlighted a significant decline in the frequency of visits from all income groups, although the reduction among lower- and middle-income guests has been particularly pronounced. These observations suggest that economic headwinds, including rising unemployment and increased financial pressures, are affecting consumer behavior across the restaurant sector.
Future Prospects for M&M Custard
As reported by KVTV 5, M&M Custard intends to close several locations as part of its strategy to navigate through bankruptcy. This move underscores the current instability within the fast-food industry.
