Hardee’s Franchisee Files for Bankruptcy After Closing Some Stores, Citing Alleged Seller ‘Omissions’

Superior Star, LLC, a Hardee’s franchisee based in Arizona, has filed for Chapter 11 bankruptcy, citing unexpected financial difficulties stemming from an acquisition made earlier this year. The franchisee, which operates 59 restaurants across ten states, attributed its financial woes to what it describes as misrepresentations and omissions by the seller, Starcorp.

Court documents reveal that Superior Star acquired the restaurants from Starcorp in 2023 for approximately £10.4 million. Following the purchase, the company’s principals invested an additional £3.2 million into the operations. However, they claim they were confronted with significant and unforeseen costs related to maintenance, deferred repairs, unpaid taxes, and mounting operational liabilities.

The declaration submitted by Superior Star indicates that these unforeseen expenses severely restricted cash flow, which could have otherwise been allocated to meeting debt obligations and maintaining operational stability. It asserts that the properties were in poor condition, which deterred customers and increased operational costs. The franchisee also noted that rising food prices and diminishing demand exacerbated the situation, creating a challenging economic environment for their establishments.

In the two-and-a-half years leading up to the bankruptcy, the company’s principals are reported to have injected around £1.6 million into the business, including a recent £240,000 contribution to ensure payroll continuity. However, financial strains led the company to fall behind on state sales taxes, resulting in tax levies that further hampered its cash flow.

Superior Star also acknowledged having closed several underperforming locations, and although it terminated leases and franchises, it still found itself responsible for ongoing rent payments at some sites. The company intends to reject several of these agreements as part of its restructuring plan.

In an effort to navigate these financial challenges, Superior Star has filed for Chapter 11, which will allow it to reorganise its debts and liabilities while trying to preserve its operations. According to the declaration, the franchisee has the potential to generate significant revenue—reportedly up to £64 million in gross revenue for 2025—but has struggled due to circumstances beyond its control.

The bankruptcy petition filed on July 9 estimated that the franchisee has between 1,000 and 5,000 creditors, with both assets and liabilities falling between £7.7 million and £38.6 million. Superior Star has outstanding debts, including over £5.5 million owed to Starcorp related to a disputed seller note.

The company believes that restructuring will allow it to address its liabilities and emerge as a stronger business capable of fulfilling its operational obligations, such as paying employees and fulfilling tax liabilities. The declaration highlighted that roughly 850 employees are directly affected, with reports of approximately £390,000 in overdue wages.

The Chapter 11 filing enables Superior Star to embark on a reorganisation plan aimed at maintaining business operations. The firm has expressed its intention to continue its operations during the legal proceedings, relying on existing cash flow and income.

In a statement regarding the bankruptcy, Hardee’s confirmed awareness of Superior Star’s situation and remarked that they are evaluating the matter. Meanwhile, representatives from Starcorp and Superior Star have yet to respond to requests for further comment.

This bankruptcy filing from Superior Star comes in the wake of another Hardee’s franchisee, ARC Burger, LLC, which filed for Chapter 7 bankruptcy in April amid its own legal disputes with the franchisor. ARC Burger reported over £22 million in liabilities, culminating in a lawsuit from Hardee’s for alleged breach of contract due to outstanding payments.

As Superior Star navigates this challenging period, the outcome of its restructuring efforts will be closely watched by both industry observers and affected stakeholders, as the fast-food sector continues to grapple with its own economic uncertainties.