Freddy’s operator declares bankruptcy

Core Insights - M&M Custard, a major operator of Freddy's Frozen Custard & Steakburgers, filed for Chapter 11 bankruptcy protection, citing significant financial challenges stemming from its expansion into the Chicago market [7] - The company reported approximately $5 million in assets against nearly $28 million in liabilities, indicating a severe financial imbalance [7] - The Chicago locations, initially seen as a growth opportunity, became a "toxic asset" with negative EBITDA, leading to the closure of 11 restaurants and a reduction in unit count from 42 to 31 [4][5] Company Performance - M&M Custard generated about $58.1 million in revenue prior to the bankruptcy filing, with its legacy restaurants contributing over $48 million from 31 profitable locations [3][4] - The company invested $1 million to acquire existing Freddy's locations in Chicago but struggled to achieve sustainable traction over three years [3][5] - The restructuring aims to eliminate the financial drag caused by the underperforming Chicago stores, allowing for potential reorganization and recovery [5] Industry Context - The filing reflects a broader trend in the restaurant industry, where operators are increasingly seeking bankruptcy protections due to rising costs and declining sales [6] - Other franchisees, such as a 57-unit Burger King operator and a 22-unit Del Taco franchisee, have also faced similar challenges, leading to bankruptcy filings in recent months [6]