Carl’s Jr. Franchisee Files for Bankruptcy Amid Financial Struggles
A significant Carl’s Jr. franchise operator has initiated Chapter 11 bankruptcy. The reasons cited include California’s $20 minimum wage law for fast food, aggressive merchant cash advance practices, and rising inflation, which have all contributed to the financial hardships faced by the business.
Sun Gir Inc., which runs 59 Carl’s Jr. locations in Southern California, is taking the lead in this bankruptcy filing, alongside several related firms under its parent organization, Friendly Franchisees Corporation (FFC). In an effort to restructure, Sun Gir has enlisted a brokerage to sell its remaining restaurants and is seeking court approval to terminate leases on 10 poorly performing locations.
The $20 minimum wage mandate is specifically pointed out in court documents as a critical factor in the franchise’s decline. Harshad Dharod, the CEO and Founder, shared that this wage hike has significantly raised operational costs, causing the stores to lose over $600,000 each month this year, even though they generate about $6 million in monthly revenue.
“You can close stores and get out of leases during bankruptcy, minimizing the damage,” explained bankruptcy attorney Alex Mattera, discussing financial strategies in the fast-food industry.
“The issue is that businesses often wait until it’s their last option. When that happens, success is questionable because there’s often not enough left to salvage,” Mattera further remarked.
In addition to the wage issue, the court filings also criticize CKE Restaurants, Carl’s Jr.’s parent company. Dharod addressed a “lack of innovation” from the franchisor, as well as diminished marketing effectiveness and high turnover among executives, which have adversely affected profits over the past couple of years.
Other major players in the fast-food realm, such as Hardee’s, have encountered similar downturns. Since 2019, Hardee’s has seen a decrease in its domestic presence while Carl’s Jr. has also experienced a reduction in its U.S. locations, dropping to approximately 1,032 by late 2025.
It’s worth noting that FFC’s website still touts its past regional profits and sales as having exceeded the brand average, which seems at odds with these recent struggles.
Research has revealed that the minimum wage increase may have resulted in a loss of around 18,000 jobs in California’s fast-food sector since the law’s implementation, marking a 3.2% decline compared to national performance.
“Our median estimate indicates a loss of 18,000 jobs in California’s fast-food sector compared to what could have been,” stated economists Jeffrey Clemens, Olivia Edwards, and Jonathan Meer in a working paper from the National Bureau of Economic Research.
