A major Carl’s Jr. franchisee in California has blamed the state’s $20 fast-food minimum wage for pushing it into bankruptcy, even as broader operational challenges weighed on the business.
Friendly Franchisees Corp., which operates 65 Carl’s Jr. locations across California, filed for Chapter 11 bankruptcy protection through multiple subsidiaries earlier this month. One of those entities, Sun Gir, said in court filings that the wage hike implemented in 2024, “materially increased operating expenses,” adding significant pressure to the business.
The operator said the rising labour costs came at a time when sales were already weakening. Over the past two years, the company experienced declining revenues, which it attributed to reduced marketing effectiveness, increased competition in the quick-service restaurant segment, and a lack of innovation at the franchisor level.
Despite generating nearly $20 million in net sales in the first quarter of the year, equivalent to roughly $6-7 million per month, the business reported a net loss of about $2 million during the same period, highlighting the strain of rising costs.
Sun Gir also disclosed that it had defaulted on several franchise agreements due to delayed payments on rent, royalties and other obligations. These defaults could lead to termination of agreements, potentially impacting its ability to continue operating certain locations.
The company employs around 1,000 workers and has sought to use cash collateral during bankruptcy proceedings to fund payroll, inventory purchases, rent and insurance, as well as meet ongoing franchise obligations.
Friendly Franchisees, led by founder and CEO Harshad Dharod, has operated Carl’s Jr. restaurants since 2000. The bankruptcy filing covers multiple affiliated entities, a common structure among large franchise operators managing both restaurant operations and real estate holdings.
While the franchisee pointed to California’s wage policy as a key factor, industry-wide headwinds have also intensified pressure on operators. Consumer spending across the Carl’s Jr. system fell about 4 percent in 2025, reflecting broader softness in the quick-service restaurant sector as customers become more price-sensitive.
The Carl’s Jr. brand has maintained that the situation is limited to this specific franchisee and does not impact the broader system, which continues to operate hundreds of locations across the state.
