Major Carl’s Jr./Hardee’s franchisees file for bankruptcy

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Two franchisee groups owning over 160 Hardee’s and Carl’s, Jr. fast-food restaurants have filed for bankruptcy, listing nearly $2.5 million in debt to their franchisors on their court filings.

Three grandchildren of Carl’s Jr. founder Carl Karcher own the bankrupt Arizona-based franchisee entities, Frontier Star LLC and Frontier Star CJ LLC. The 160-plus Frontier Star stores represent over 5 percent of the Hardee’s/Carl’s Jr. U.S. store count. Carl’s Jr. and Hardee’s – burger chains with similar menus owned by franchisor CKE Restaurants – have a combined total of nearly 2,900 U.S. units.

Mandatory major capital investments could have contributed to Frontier Star’s troubles. As the Arizona Republic observed in its coverage of the Frontier Star bankruptcy: “The fast-food restaurant business is highly competitive and … franchisees often are required to undertake expensive remodeling costs that can burden them.”  For example, McDonald’s turnaround plan could require franchisees to make up to $125,000 in new investments, and Wendy’s is suing to terminate one of its largest franchisees for allegedly refusing to renovate restaurants.

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