A Freddy’s Frozen Custard & Steakburgers franchisee has filed for bankruptcy in Kansas after closing 11 stores in the Chicago area starting in 2024.
M&M Custard filed for Chapter 11 protection on Nov. 14 and in an affidavit, M&M Custard co-founder and CEO Eric Cole said the franchisee will successfully reorganize now that underperforming stores have been removed from its properties.
Court records show the franchisee reported assets of $5.2 million to $27.65 million in liabilities. The company has more than 100 creditors.
M&M Custard opened its first Freddy’s franchise in 2012 in Jefferson City, Missouri, and had 42 franchises before Chicago closed. Cole confirmed in an email to USA TODAY on Nov. 19 that the company will keep open the remaining 31 locations it operates in six states.
Here’s what you need to know about M&M Custard’s bankruptcy.
M&M Custard acquired three Chicago-area stores in 2021 after Freddy’s approached it to develop the market, according to Cole’s affidavit. As of March 2024, the franchisee had 11 stores in the market.
Cole said in the affidavit that the franchisee had become two “fundamentally different businesses” and that the Chicago stores “created a financial burden” for the company, while its 31 “legacy stores” remained profitable.
“The combination of sustained negative EBITDA, limited buyer appetite for underperforming assets, and the increasingly onerous regulatory and tax environment in Illinois eroded the long-term viability of the market,” Cole said.
Stores began closing in March 2024 and the last one closed in October 2025.
Freddy’s called the bankruptcy an “unfortunate and isolated situation” in a statement to USA TODAY, adding that it is working to ensure restaurants see “little to no disruption” during the bankruptcy process.
“It is important to note that this presentation applies only to this specific group of franchisees and is not a reflection of Freddy’s corporate stability or the performance of other franchisees,” the statement read.
Food outlet Nation’s Restaurant News reported that Freddy’s had a stronger 2024 than its burger chain peers, with year-over-year sales growth of 6.8%.
This article originally appeared on USA TODAY: Freddy’s Franchisee Filed for Bankruptcy. See impacted stores.