Some Wendy's Restaurants In CT On Edge As Major Franchisee Files For Bankruptcy Protection

CONNECTICUT — Some Wendy's restaurants in Connecticut began the business week on edge in the wake of a major franchisee's financial woes.

Meritage Hospitality Group Inc. filed for voluntary Chapter 11 bankruptcy protection on Sept. 17 in the U.S. Bankruptcy Court for the Western District of Michigan, saying the restructuring is intended to "strengthen its balance sheet" and establish a "sustainable capital structure."

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Meritage operates 314 Wendy's restaurants, one Bojangles restaurant and five independently branded restaurants in 15 states, according to the company's Chapter 11 filing announcement.

There are 29 in Connecticut, but Meritage does not publish a current Connecticut location-by-location list of its Wendy's holdings.

The company said it expects its restaurants to continue operating during the bankruptcy proceedings. Meritage also said it intends to continue paying wages and benefits for its approximately 9,000 employees, subject to court approval of its initial bankruptcy motions.

The company said it also intends to continue paying suppliers and vendors in the ordinary course for goods and services provided after the Sept. 17 filing.

Meritage said the bankruptcy filing follows more than a year of discussions with its lenders and the franchisor about the company's financial condition.

The company cited "sustained system-wide headwinds" affecting the broader Wendy's brand as a significant factor in its financial difficulties. Because most of Meritage's restaurants operate under the Wendy's brand, the company said those pressures have had a significant effect on its financial position.

Meritage's board and management ultimately determined that a voluntary, court-supervised restructuring was the appropriate course, according to the filing announcement.

The company said it remains confident in the opportunity for a turnaround of the Wendy's brand.

Meritage said it is seeking debtor-in-possession, or DIP, financing to provide liquidity during the Chapter 11 case.

The company said in the filing that expects the financing, combined with cash generated by its ongoing operations, to provide sufficient liquidity to operate throughout the restructuring.

Meritage also plans to seek court approval for a series of "first day" motions, which include requests to continue paying employee wages and benefits, honor certain customer programs and obtain "other relief needed to maintain normal operations."

Meritage said the Chapter 11 process will give it an opportunity to strengthen its balance sheet and create greater financial flexibility.

The company said it intends to work with its stakeholders during the restructuring to determine how to maximize value. It also said it will explore "all strategic alternatives" as part of the process.

The filing does not state that the company is immediately closing its restaurants. Instead, Meritage said its restaurants will remain open while the Chapter 11 case proceeds.