Dozens of Hardee’s locations across nine states are set to shut down after franchisee ARC Burger, LLC filed for Chapter 7 bankruptcy.
The major operator — one of the chain’s largest — is liquidating its assets and shutting down 77 Hardee’s locations in Alabama, Florida, Georgia, Illinois, Kansas, Missouri, Montana, South Carolina and Wyoming. The proceeds from the liquidation will be distributed to creditors.
The collapse follows a months-long legal battle between ARC and Hardee’s, which alleges the franchisee racked up more than $6.5 million in unpaid fees and royalties.
Documents cited by People magazine show that ARC has more than $29 million in liabilities and that it owes money to more than 5,000 creditors.
Last November, Hardee’s filed a lawsuit against ARC alleging breach of contract for outstanding payments owed in the franchise agreement.
The company said in the complaint that it sought to work with ARC on “payment defaults, including by attempting to reach 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 wrote.
According to the complaint, Hardee’s terminated its franchise agreements with ARC last September but allowed the firm to operate its restaurants while it searched for a buyer — contingent on ARC remaining current on its payments.
Hardee’s accused ARC of failing 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 alleged.
The Post has sought comment from ARC and Hardee’s.
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