Freddy’s Frozen Custard & Steakburgers, a popular fast-food chain known for its delicious made-to-order burgers and creamy custard, has recently found itself in the spotlight for reasons beyond its mouthwatering menu items. One of its franchisees, M&M Custard, LLC, has filed for Chapter 11 bankruptcy, sending shockwaves through the industry.
On November 14, M&M Custard, LLC filed for Chapter 11 bankruptcy with the United States Bankruptcy Court for the District of Kansas. This type of bankruptcy allows companies with significant debt to restructure and repay creditors without having to shut down operations. According to court documents, M&M Custard has assets totaling just over $5 million but owes nearly $28 million to creditors.
The story of M&M Custard’s rise and fall is a cautionary tale in the world of franchising. In 2012, the company opened its first Freddy’s Frozen Custard & Steakburgers location in Jefferson City, Missouri, followed by a second one in Sedalia, Missouri. The franchisee quickly expanded and eventually operated 42 locations across six states, including Missouri, Illinois, Indiana, Kentucky, Tennessee, and Kansas.
In 2021, M&M Custard was presented with an opportunity by Freddy’s Frozen Custard & Steakburgers to expand into the lucrative Chicago market. The franchisor believed that this move had significant potential for growth and success. Excited by the opportunity, M&M Custard secured land and launched marketing initiatives to attract customers to the new locations.
However, after just three years, the Chicago expansion proved to be unsuccessful. The company found itself split into two distinct entities: M&M Custard Legacy, which consisted of 31 profitable and well-established stores, and M&M Custard Chicago, which became a financial burden on the business.
To safeguard its legacy stores, M&M Custard made the difficult decision to close its Chicago locations, with the final one shutting down permanently in October. The company sees this strategic move as a necessary step to reorganize and protect its profitable operations. It remains unclear whether any of the legacy stores will be directly impacted by the closures.
The bankruptcy filing by M&M Custard has sent shockwaves through the Freddy’s Frozen Custard & Steakburgers franchise network, raising concerns about the stability and future of the company. As the franchisee navigates the Chapter 11 bankruptcy process, the fate of its remaining stores and the impact on the broader franchise system remain uncertain. This development serves as a stark reminder of the challenges and risks associated with rapid expansion in the competitive fast-food industry.
