Carl’s Jr. Franchisee Closes 10 Restaurants, Sells 49 After Bankruptcy, June 13

A large Carl’s Jr. franchisee is shutting down 10 restaurants and selling 49 others after filing for Chapter 11 bankruptcy protection in April 2026. Harshad Dharod, founder of Friendly Franchisees Corporation, operates mostly in Southern California. The operator blamed California’s $20 minimum wage for the financial distress. The closures mark a significant contraction in the franchise system, though the parent company says other franchisees remain unaffected.

Bankruptcy Filing and Restructuring Plan

Friendly Franchisees Corporation filed for Chapter 11 protection in April 2026 in Santa Ana bankruptcy court. The operator originally ran 59 Carl’s Jr. locations across California. The company hired National Franchise Sales to sell 49 franchised sites. A July 1 hearing will determine which leases the company seeks to reject, including the Farmers Lane location in Santa Rosa that has operated since 1990. Rejection of three Southern California leases was already approved on June 3.

Why Labor Costs Triggered the Crisis

Dharod cited California’s $20 minimum wage as a primary driver of the financial troubles that began about two years ago. The wage requirement makes it impossible to cover operating expenses at many locations. Restaurant Dive reported that Carl’s Jr. system sales dropped 6 percent in 2025, adding pressure on individual franchisees. The chain operates in 15 states but faces particular challenges in high-wage markets.

Impact on the Broader Franchise System

Carl’s Jr. parent company CKE Restaurants Holdings said the situation is specific to Dharod’s financial circumstances and has no impact on other franchisees. Nine other North Bay Carl’s Jr. restaurants in Sonoma, Solano, and Lake counties operate under different ownership and are unaffected. The spokesperson stated the franchise system remains strong and committed to growth. The Santa Rosa location’s lease expires in July 2026, and the property will revert to landlord Lakeside Leasing Inc.

Broader Restaurant Industry Stress

The Carl’s Jr. closures reflect wider pressure on casual dining chains. On The Border Mexican Grill and Cantina shut down all company-owned locations on June 12, 2026, after filing for bankruptcy in 2025. Rising labor costs, inflation, and consumer spending pressures continue to squeeze restaurant operators across the sector. Darden Restaurants, which operates 1,867 restaurants including Olive Garden and LongHorn Steakhouse, trades at $211.47 USD with a B rating from Meyka, suggesting limited upside at current valuations.

Final Thoughts

Carl’s Jr. franchisee closures signal mounting pressure on casual dining from labor costs and weak demand. With Meyka rating DRI a B and analysts targeting $230.47, the sector faces headwinds despite some stabilization.

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