Dem endorsed $20 minimum wage for fast-food workers leads Carl’s Jr. franchisee to bankruptcy

A major Carl’s Jr. franchise operator in California has filed for Chapter 11 bankruptcy, pointing to the state’s $20 minimum wage for fast-food workers as a key driver of its financial troubles.

Friendly Franchisees Corporation, through its subsidiary Sun Gir, said in a court filing that the wage increase, implemented in 2024, “materially increased operating expenses,” according to CEO and founder Harshad Dharod and reported by Restaurant Dive.

The company operates 59 Carl’s Jr. locations across the state, including 52 in Southern California and seven in Northern California.

Despite generating what it described as “substantial revenue,” the business has struggled to stay profitable.

In the first three months of the year, Sun Gir reported $19.9 million in net sales, averaging between $6 million and $7 million per month.

Even so, it recorded a $2 million net loss during that period, citing high ongoing operating costs.

Dharod also attributed declining performance to “reduced marketing effectiveness” and a “lack of innovation at the franchisor level.”

He noted that increased competition in the quick-service restaurant sector and executive turnover at the franchisor created additional operational challenges.

Financial strain has led to missed payments on rent, royalties, and other obligations tied to franchise agreements.

As a result, the company is now in default at several locations, putting those agreements at risk of termination and threatening its ability to continue operating those restaurants.

To maintain operations during the bankruptcy process, Sun Gir is seeking to use cash collateral to fund essential expenses, including payroll for approximately 1,000 employees, inventory purchases, rent, insurance, and other contractual obligations.

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The wage increase at the center of the dispute was the result of a political compromise between labor groups and the restaurant industry, replacing a proposal that would have set an even higher sector-specific wage.

Its broader economic impact remains debated, with supporters saying it has had minimal effect and critics arguing it has contributed to higher menu prices and reduced worker hours.

At the same time, the fast-food sector has been dealing with more price-sensitive consumers nationwide.

According to Circana, total consumer spending at Carl’s Jr. declined 4% in 2025, adding further pressure on operators like Sun Gir.