Freddy’s Franchisee Files for Bankruptcy After Closing 11 Stores — What Went Wrong

A major operator of Freddy’s Frozen Custard & Steakburgers restaurants has filed for Chapter 11 bankruptcy after pulling out of the Chicago market.
The filing comes after 11 store closures across the region between 2024 and late 2025.

M&M Custard, based in Kansas, submitted its petition on Nov. 14.
In an affidavit, co-founder and CEO Eric Cole said the company expects to stabilize now that its Chicago locations—described as consistent money-losing units—are no longer part of the business.

Court documents list assets of $5.2 million and liabilities of up to $27.65 million, with more than 100 creditorsincluded in the case.

M&M Custard, which opened its first Freddy’s franchise in 2012, operated 42 locations before the closures. Cole confirmed on Nov. 19 that the remaining 31 restaurants across six states will continue to operate.

Withdrawal From the Chicago Region

The franchisee entered the Chicago market in 2021, acquiring three locations after being approached by Freddy’s about developing the area.
By early 2024, the group operated 11 stores in the region.

Cole wrote that the Chicago units created ongoing losses while the company’s longstanding stores elsewhere remained profitable. He said the business effectively split into two separate operations:

• a group of older stores with stable earnings, and

• the Chicago locations, which added financial pressure.

In the filing, Cole pointed to sustained losses, the absence of buyers willing to acquire the underperforming stores, and regulatory and tax conditions in Illinois as issues that made continued operations in the region unworkable.

Locations began closing in March 2024, and the last Chicago store closed in October 2025.

Response From Freddy’s Corporate

Freddy’s said the bankruptcy applies only to this franchise group and does not involve the company’s broader system or other operators.
In a statement, the company said it is working with M&M Custard so that customers and employees see “little to no interruption” while the case moves through the court process.

Freddy’s also stressed that the filing does not signal wider strain across the brand.

Industry reporting earlier this year shows that Freddy’s posted 6.8% sales growth in 2024, outpacing many other burger chains.

Status of the Remaining Stores

M&M Custard told the court that all 31 of its other locations will stay open while the bankruptcy case moves ahead.
The company said the Chicago closures removed the stores that were draining cash, allowing the rest of the restaurants to continue operating under normal hours.

The filing gives the franchisee time to sort out its debts while continuing to run the restaurants it kept.
In its court statements, the company said the remaining stores are stable and did not require any closures as part of the petition.

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