Hardee’s Franchise Closures: ARC Burger Lawsuit and Unpaid Royalties

Hardee’s, a 65-year-old burger chain best known for its Thickburgers and breakfast biscuits, is facing a fast-moving round of closures driven by a franchise dispute rather than a bankruptcy filing. Inc. recently reported that 77 Hardee’s restaurants are expected to close within two weeks as one of the brand’s largest franchisees exits the system.

According to the report, Hardee’s is suing ARC Burger — a franchise operator owned by High Bluff Capital Partners — alleging the company fell behind on required payments and other contract obligations. Twenty-eight locations had already gone dark as of late December, with remaining sites scheduled to shutter across eight states: Alabama, Florida, Georgia, Illinois, Missouri, Montana, South Carolina and Wyoming.

At the center of the complaint is the franchising “stack” of ongoing fees and pass-through costs that keep a system running. ARC Burger allegedly owes more than $6.5 million, including royalties, advertising fund contributions, technology and training fees, rent and taxes, and that payments stopped in December 2024. Hardee’s also argued in the lawsuit that the franchisee’s cash flow was not being used to bring accounts current.

Hardee’s, for its part, is framing the shutdowns as a contractual enforcement issue, not a brand-wide retrenchment. “These closures are a result of ARC Burger’s failure to cure its defaults under its franchise agreements, despite solid sales,” a Hardee’s spokesperson said.

The situation highlights a familiar franchising pressure point: unit economics. Inc. reported that Hardee’s operates more than 1,800 U.S. restaurants and that average annual sales per location are less than $1.2 million, well below averages cited for Wendy’s and McDonald’s. Lower volumes can leave franchisees with less room to absorb higher labor, food and occupancy costs while staying current on fees.

Hardee’s said it is working to limit fallout for workers and communities and is looking for ways to reopen closed restaurants. For franchising, the next chapter will likely involve finding replacement operators, transferring sites and rebuilding compliance — a reminder that franchise growth depends as much on franchisee solvency and execution as it does on consumer demand.