After franchisee ARC Burger, LLC filed for Chapter 7 bankruptcy, 77 Hardee’s locations across nine states are set to close.
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The major operator, one of the chain’s largest, is liquidating its assets and shutting down dozens of Hardee’s locations across Alabama, Florida, Georgia, Illinois, Kansas, Missouri, Montana, South Carolina, and Wyoming. Proceeds from the liquidation will be distributed to creditors, per The New York Post.
The closures come after a months-long legal battle between ARC and Hardee’s, in which Hardee’s alleged the franchisee owed over $6.5 million in unpaid fees and royalties.
According to documents cited by PEOPLE, ARC has over $29 million in liabilities and owes money to more than 5,000 creditors.
Last November, Hardee’s sued ARC for breach of contract, claiming the franchisee failed to make payments owed under their agreement. In the complaint, Hardee’s stated it tried to work with ARC on “payment defaults, including by attempting to reach [an] agreement with ARC on a payment plan for past-due amounts.”
“But ARC has refused [Hardee’s] efforts to enter into a workout agreement, and despite periodic partial payments, the total amount owed to [Hardee’s] continues to increase each week,” Hardee’s added.
According to the complaint, Hardee’s ended its franchise agreements with ARC last September. However, it let ARC keep its restaurants open while it looked for a buyer, as long as ARC kept up with its payments.
Hardee’s claimed ARC failed to meet its payment obligations, “despite all signs showing that ARC is profitably running the restaurants.”
“Wherever ARC’s profits are going, they are not being applied to past-due or ongoing fees owed to [Hardee’s],” the claim added.