Hardee’s Reclaims Dozens of Restaurants in Wake of Large Franchisee’s Bankruptcy
Hardee's is reclaiming and reopening over 40 restaurants that were previously operated by ARC Burger, a franchisee that recently filed for bankruptcy. The move is part of an effort to restore services in communities affected by the closure of these locations.
This situation illustrates the risks and challenges within the franchise system and directly impacts investor strategies in the QSR sector, particularly in evaluating franchisee stability and financial performance.
Hardee’s is taking steps to reclaim and reopen over 40 restaurants previously operated by ARC Burger, a franchisee that recently filed for Chapter 7 bankruptcy. ARC Burger, which managed 77 Hardee’s locations across nine states, ceased operations in December 2025 and reported liabilities up to $50 million with a creditor list exceeding 5,000. Following the bankruptcy filing, Hardee’s plans to restore service in affected communities, with more than 20 locations already reopened in Georgia, South Carolina, and Missouri.
Additional sites are currently under review for future operation as either company-owned stores or franchises. The situation arose after Hardee’s initiated legal action against ARC in November 2025, claiming over $6. 5 million in unpaid royalties, rent, and advertising contributions.
Hardee’s noted that ARC began defaulting on payments in late 2024. Franchise agreements were terminated in September 2025; however, ARC was initially allowed to continue operating under the potential for a sale agreement contingent on meeting financial obligations, which ultimately did not materialize. ARC’s bankruptcy proceedings come with contested claims that operational challenges were already present prior to their acquisition of the restaurants from Summit Restaurant Holdings in 2023.
ARC alleged discovering significant issues post-acquisition, such as failing equipment and outdated systems, necessitating more than $10 million in unplanned investments. The franchisee cited persistent operational difficulties, including point-of-sale and connectivity problems, as well as inadequate marketing support, leading to their eventual insolvency. Hardee's denied these allegations, asserting that the financial challenges were primarily due to ARC’s failure to fulfill their contractual obligations.
The dispute escalated, culminating in the termination of ARC's rights to operate the restaurants and the closure of all locations shortly before Christmas, which impacted more than 1,600 employees according to bankruptcy documents. This situation underscores the complexities of franchise relationships and the volatility that can arise within the franchise model, particularly amid financial distress.