A major restaurant chain with over 30 locations across the United States has filed for bankruptcy, blaming skyrocketing food and labor costs for its financial woes.
M&M Custard LLC, one of the largest franchise operators for Freddy’s Frozen Custard and Steakburgers, has locations across six states and had announced ambitious plans to expand throughout Chicago just three years ago.
However, since then, the company has been forced to file a Chapter 11 bankruptcy case, listing its $5.52 million in assets dwarfed by its $27.7 million in liabilities.
Fears that the chain could close its stores in Missouri, Illinois, Kentucky, Tennessee, Indiana, and Kansas intensified after the filing. However, the company is reportedly working to keep all its stores open.
“We have no comment beyond that there is no plans to close any additional stores whatsoever,” Eric Cole, Co-CEO and founder of M&M Custard LLC told The Independent. “The stores we closed that led to our filing were in the Chicago market. It's business as usual for our 31 franchise locations as well as the rest of Freddy's across the US.”
Court documents indicate that the company is seeking permission to keep its current banking arrangements and to take measures to manage its stagnating cash flow.
Since M&M is a franchise operator, the dire financial situation relates only to its stores, not to the larger Freddy’s Frozen Custard and Steakburger brand.
Court documents, filed by the company and seen by Franchise Times, claim that the chain’s Chicago stores were a “toxic asset” which were purchased in 2021. M&M Custard invested $1 million to acquire and develop the six Chicago stores.
Just three years later, the court documents suggest that the company was forced to begin a program of closures in Chicago.
In the bankruptcy filing, the brand blamed a combination of "combination of sustained negative EBITDA, limited buyer appetite for underperforming assets, and the increasingly burdensome regulatory and tax environment in Illinois eroded the long-term viability of the market,” according to Franchise Times.
"Despite targeted expansion, operational improvements, and increased market awareness, three years later (six years total under the brand), the Chicago market has struggled to gain sustainable traction, raising significant concerns about its long-term viability," the filing continued.
Freddy’s Frozen Custard and Steakburger weighed in on the M&M Custard LLC’s bankruptcy filing.
"We are aware that one of our franchise groups, M&M Custard LLC, an independently owned and operated franchise group, has filed for Chapter 11 bankruptcy as part of its own financial restructuring,” a spokesperson for Freddy’s Frozen Custard and Steakburger told The Independent. “It is important to note that this filing applies only to this specific franchisee group and is not a reflection of Freddy's corporate stability or the performance of other franchisees.
“This unfortunate and isolated situation is the result of numerous compounding factors. We empathize with anyone impacted by this within the M&M group and want everyone to know that corporate is fully engaged and will do all that we can to ensure that the restaurants see little to no interruption while M&M works to complete their restructuring.
“We believe this story will have a positive outcome and look forward to providing the same high-quality food, friendly service, and consistent experience our guests have always received at our restaurants."
Freddy’s Frozen Custard and Steakburger is locked in a tense rivalry with Dairy Queen, since both companies are known for selling whipped desserts alongside hamburgers.
However, some Reddit fans have revealed they prefer Freddy’s meals to Dairy Queen’s iconic food.
“Similar to Dairy Queen but maybe better presentation and aesthetic,” one enthusiastic diner wrote. “The taste is different too. Probably fair to say that it's richer and creamier. I'm happy to have it around as an option for those kinds of desserts.”
Another fan was less enthused, saying that the burger chain outranked McDonald’s but not Five Guys.
"It was pretty good,” the burger lover wrote. “Fast service and the ice cream is great. It's above McDonald's but below 5 guys."
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