Fan-Favorite Burger Joint Files for Bankruptcy
One of the largest franchise operators for Freddy’s Frozen Custard and Steakburgers has filed for Chapter 11 bankruptcy protection. M&M Custard LLC operates over 30 locations across six states and cited overwhelming financial pressures as the reason for its filing. The company reported just $5.2 million in assets against a staggering $27.7 million in liabilities owed to more than 100 creditors. Despite the financial troubles, the operator insists all remaining stores will stay open.
The Rise of M&M Custard
Founded in 2010 by Eric Cole, M&M Custard opened its first Freddy’s location in Jefferson City, Missouri, in 2012. The company quickly became one of Freddy’s most successful franchisees, earning multiple awards, including Operator of the Year and Developer of the Year. At its peak, M&M Custard operated 42 Freddy’s locations across Missouri, Kansas, Illinois, Indiana, Kentucky, and Tennessee. The company was consistently ranked among the brand’s top five franchisees for performance and average unit volumes.
Ambitious Chicago Expansion Plans
In 2022, M&M Custard signed an ambitious development agreement to expand Freddy’s footprint in the Chicago market. The company committed to opening 13 new locations across Lake and McHenry counties. Freddy’s corporate praised M&M Custard as a “veteran franchise group” that had consistently fueled the brand’s national expansion. The Chicago market appeared to offer significant growth potential. However, this expansion would ultimately become the company’s biggest financial burden.
The Chicago Market Becomes a “Toxic Asset”
The troubles began when Freddy’s corporate approached M&M Custard in 2021 with an offer to purchase six underperforming corporate stores in Chicago. M&M invested $1 million to acquire the stores and secure exclusive development rights for the market. The company built additional high-visibility locations to increase brand awareness. Despite these efforts, the Chicago market never gained traction. By early 2024, all 11 Chicago locations were generating negative earnings, creating a financial drain on the entire operation.
Rising Costs Squeeze Profit Margins
Court documents revealed that a combination of factors eroded the market’s viability. Increased rent, soaring labor costs, and higher food expenses strangled profitability across the Midwest stores. The bankruptcy filing specifically cited “sustained negative EBITDA” and the “increasingly burdensome regulatory and tax environment in Illinois.” CEO Eric Cole stated that despite targeted expansion, operational improvements, and increased brand awareness, the Chicago stores struggled to become sustainable. These mounting pressures made it impossible to continue operations without restructuring.
Store Closures Begin in 2024
M&M Custard began systematically closing its Chicago locations in March 2024 to contain the financial hemorrhaging. One location closed in March, another in May, and eight more shuttered between August and October. The final Chicago store closed after its lease was canceled. The company stated there was limited buyer appetite for the underperforming assets. By November, all 11 Chicago locations had been permanently shut down. The closures signaled deeper financial problems that bankruptcy protection could not delay any longer.
Only M&M Custard Affected by the Filing
It’s important to note that this bankruptcy filing applies exclusively to M&M Custard and its 31 affiliate locations. The filing does not reflect on Freddy’s corporate stability or the performance of other franchisees. Freddy’s ended 2024 with 550 locations and nearly $990 million in systemwide sales, representing a 6.8 percent increase. The parent brand was recently acquired by private equity firm Rhône Group for $700 million. Freddy’s corporate stated they’re fully engaged to ensure restaurants experience minimal interruption during restructuring.
Path Forward Through Reorganization
M&M Custard believes the business can be successfully reorganized without the drag from the Chicago stores. The company has requested court permission to maintain existing banking arrangements and manage daily operations while restructuring its debts. All 31 remaining locations across Missouri, Kansas, Indiana, Kentucky, and Tennessee continue to operate normally and generate approximately $48.4 million in annual revenue. The Chapter 11 process allows the company to reorganize rather than liquidate. No additional store closures are currently planned.
Part of Broader Industry Struggles
M&M Custard’s bankruptcy reflects wider challenges facing restaurant operators nationwide. Multiple chains have filed for bankruptcy protection or closed locations throughout 2024 and 2025. A 57-unit Burger King operator filed for Chapter 11 in April, while a 22-unit Del Taco franchisee declared bankruptcy in July. Industry experts note that lower- and middle-income consumers have significantly reduced dining frequency due to unemployment concerns, student loan repayments, and slower wage growth. These economic headwinds have hit the retail and restaurant sectors especially hard.
Cautionary Tale for Restaurant Expansion
The M&M Custard situation serves as a cautionary tale about aggressive expansion into underperforming markets. What began as an opportunity to grow a successful franchise operation became a financial catastrophe when market conditions didn’t improve as hoped. While the company works through bankruptcy restructuring, its remaining locations continue serving customers. The outcome will depend on whether M&M Custard can successfully shed its troubled assets and refocus on its profitable core markets. For now, fans can still enjoy their frozen custard and steakburgers.
