Bankruptcies of Restaurant Franchise Operators in the U.S. Surpassed 2025 Total

Bankruptcy filings by multi-unit franchise operators in the U.S. restaurant sector accelerated in 2026. According to Restaurant Business's count dated July 15, at least 10 multi-unit restaurant operators sought protection under Chapter 7 or Chapter 11 during this period of the year. This number exceeds the total recorded for all of 2025, while the report notes that filings from small operators with two restaurants were not included in the count.

Although the figure is striking, it is not an official restaurant bankruptcy statistic. It is a periodic count based on publicly available court filings. No standard threshold has been published regarding which size operators are included. Therefore, there is no current and definitive answer to the question, "How many restaurant franchise operators have gone bankrupt in the U.S.?"

In contrast, broader commercial bankruptcy data indicates a general rise that is not limited to restaurants. According to Epiq AACER, commercial Chapter 11 filings in the U.S. reached 4,589 in the first half of 2026, a 28% increase compared to the same period last year. Subchapter V filings used by small businesses rose by 50%. These figures do not solely prove the increase in restaurants, but they indicate that the financial environment in which franchise operators find themselves overlaps with a broader commercial squeeze.

Bankruptcy of a franchise operator is not the bankruptcy of the brand

The most common mistake in bankruptcy news is to treat the franchise operator and the brand owner as the same company. A significant portion of the restaurants operating under the Popeyes, Applebee’s, Subway, or Hardee’s signs may belong to legally and financially separate operators from the brand's parent company.

Therefore, the bankruptcy of a large Popeyes franchise group does not mean that the Popeyes brand or its parent company has gone bankrupt. The filing only covers the legal entities that made the application, the restaurants they operate, their debts, and contracts.

The type of filing is also important. According to the U.S. Courts' explanation, Chapter 11 generally allows the business to restructure its debts while continuing operations, sell assets, or create a payment plan. Chapter 7, on the other hand, is generally the process of liquidating assets and distributing the proceeds to creditors. Thus, a Chapter 11 filing does not mean that the restaurants will close on the same day.

Cost pressure is real, but not the only explanation

The profitability issue in the U.S. restaurant sector forms the common background of bankruptcy filings. In the National Restaurant Association's 2026 industry report, 42% of operators reported that their restaurants did not make a profit in 2025. While 60% of operators stated that customer traffic had declined, more than nine out of ten operators cited food, labor, insurance, energy, and card processing fees as fundamental issues.

According to the Association's cost analysis, the average total expenses of a restaurant increased by 36% between 2019 and 2026. The average hourly wage of restaurant workers rose by 41%, and wholesale food prices increased by 35%. A representative restaurant that operated with a pre-tax margin of about 5% before the pandemic needs to increase its sales by approximately 36% to maintain the same margin.

Still, the explanation "costs increased and businesses went bankrupt" does not account for all filings. The cases in 2026 show that different operational mistakes in the same economic environment have compounded each other.

High turnover does not mean a healthy business

Sailormen, which operates 136 Popeyes restaurants in Florida and Georgia, filed for Chapter 11 in January 2026. Despite generating over $223 million in sales in 2025, the company reported an operating loss exceeding $18 million. The filing cited inflation, high borrowing costs, changing customer behaviors, and difficulties in finding qualified employees as issues.

The Sailormen example illustrates that total sales figures alone are not indicators of financial health. The company had over $112 million in unpaid principal on loans, along with more than $17 million in interest and fee burdens. When attempts to sell 16 underperforming restaurants failed, the operator continued to be responsible for some lease guarantees.

In multi-unit structures, while total revenue grows, loss-making restaurants, long-term lease agreements, and debt servicing can consume the group's cash. Especially if the operator cannot timely close or transfer weak locations, the size of the portfolio may increase risk rather than provide protection.

Profitable branches may not save a loss-making portfolio

The case of Neighborhood Restaurant Partners Florida, which operates 53 Applebee’s restaurants, also shows a similar distinction. The company's restructuring manager reported that despite some restaurants being profitable, the group's total EBITDA has been negative over the past year.

The operator closed nine restaurants in 2025 and five in the first quarter of 2026. Despite interest from 17 groups during the sales process, a suitable transaction could not be completed. The company noted that alongside rising operating costs, its primary customer base was visiting less frequently and the average check amount had declined.

This example highlights the importance of branch-based measurement. While total revenue, number of restaurants, or market share are tracked at the portfolio level, if the contribution of each location after rent, maintenance needs, and cash generation capacity is not viewed separately, problems can remain hidden for a long time.

Acquired problems can transfer to the new operator

The Chapter 11 filing of Hardee’s franchise operator Superior Star in July 2026 highlights the risks of rapid growth and condition assessment. The company reported encountering unexpected maintenance costs, unpaid taxes, and other liabilities after purchasing several restaurants for approximately $13 million in 2023.

Superior Star generated approximately $80 million in gross revenue in 2025. Nevertheless, the maintenance needs of the old restaurants, sales issues, rising food costs, and ongoing rents for some closed locations pressured the company's cash. The tax authorities' seizure of bank accounts was the final development that triggered the filing.

Buying restaurants from operators in bankruptcy or financial distress can provide new investors with ready equipment and locations. However, if deferred maintenance, old tax debts, lease guarantees, renovation obligations, and low sales volumes are not accurately assessed, the seemingly appropriate purchase price can quickly lose its meaning.

Emergency financing can further disrupt cash flow

In some filings, the problem is concentrated more on the short-term financing tools used than on restaurant operations. MTF Enterprises, a Subway operator with 43 restaurants, owed $1.4 million to two merchant cash advance companies. Court records reported by Restaurant Business indicated that one of these financings carried a cost of 59.39%, while the other had a cost of 94.54%, and that daily or weekly deductions consumed the company's cash.

Similarly, Geddo Corporation, which operates 12 Farmer Boys restaurants, stated that despite repaying approximately 97% of the $5.2 million merchant cash advance it obtained to finance growth, ongoing automatic deductions severely limited cash flow. The company generated $24.3 million in revenue in 2025 while incurring a loss of approximately $920,000.

In this type of financing, the business receives cash upfront while transferring a portion of future sales revenue to the financing company through automatic deductions. If a significant portion of daily sales goes through cards and delivery platforms, liens or automatic collections on these revenues can quickly disrupt payments for fees, suppliers, and rent.

Brands also need to establish an early warning system

In franchise systems, financial risk cannot be seen solely as the operator's responsibility. The loss of payment capacity by a large franchise group can lead to branch closures, rejection of lease agreements, loss of employees, supply disruptions, and deterioration of brand perception.

Brand owners need to monitor not only overall sales and new branch numbers but also the debt burden on an operator basis, rent/sales ratio, renovation investment, overdue tax and royalty payments, management changes, and the financial impact of closed restaurants.

From the operators' perspective, evaluation should descend from the total portfolio to the branch level. If operating profit, free cash flow, debt servicing, remaining lease term, maintenance budget, and employee turnover rate are not tracked together at the restaurant level, the sales volume generated by a strong brand can conceal a weak financial structure.

For employees, the outcome is not just closure

Restaurants under Chapter 11 can continue operations, be sold to another franchise operator, or only certain parts of the portfolio may be closed. This process creates a long period of uncertainty for employees.

The new operator may take over existing teams; however, there is no guarantee that wages, shifts, fringe benefits, and job structure will remain the same. The early departure of experienced employees from restaurants at risk of closure can further reduce service quality and sales value, making restructuring even more challenging.

Therefore, in financially distressed groups, employee communication, timely payment of wages, clarification of responsibilities at the restaurant level, and personnel planning for potential transfers should be addressed alongside legal and financial processes.

Lessons for operators in Turkey

The Chapter 11 system in the U.S., franchise law, and lease structure differ from those in Turkey. Therefore, it would not be correct to directly adapt the legal outcomes in the filings to Turkey.

Operational lessons, however, are more broadly applicable. In multi-unit restaurant investments, brand awareness, total revenue, or the number of new locations alone do not indicate healthy growth. The actual cash production, return on investment, lease obligations, financing costs, and renovation needs of each new branch must be calculated separately.

Especially when acquiring a restaurant from another operator, it is essential to look not only at sales data but also at past maintenance expenses, tax and employee liabilities, licenses, franchise agreements, equipment lifespan, and ongoing lease guarantees even if closed.

Stafflink’s view

The bankruptcies of franchise operators in 2026 do not indicate a collective failure of the franchise model. While there are many profitable restaurants operating under the same brands, portfolios expanded through debt, neglect, or poor acquisitions can enter financial distress.

In our view, the real risk is to confuse the brand's sales power with the operator's financial strength. A sign can attract customers; however, if rent, debt, maintenance, labor, and product costs exceed what the branch can bear, brand awareness cannot cover the cash shortfall.