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A major shake-up is rippling through the fast-food industry as ARC Burger files for bankruptcy, signaling the collapse of a large franchise operator entangled in a growing legal dispute with one of America’s best-known burger chains.

According to court filings obtained by PEOPLE, ARC Burger LLC filed for Chapter 7 bankruptcy on April 20, 2026, a move that typically leads to liquidation—where assets are sold off to repay creditors.

Chapter 7 Filing Signals Financial Collapse

Under Chapter 7 rules, businesses wind down operations and distribute proceeds from asset sales to creditors. ARC Burger’s filing paints a stark picture of its financial condition.

The company reported owing between 5,001 and 10,000 creditors, with estimated liabilities ranging from $10 million to $50 million. Its assets, however, were listed at just $500,001 to $1 million.

A separate financial disclosure placed its liabilities at more than $29 million, underscoring a widening gap between what the company owns and what it owes.

In a telling detail, ARC Burger indicated that after administrative costs are paid, no funds would remain for unsecured creditors—an outcome that often leaves smaller claimants empty-handed.

Lawsuit With Hardee’s Fuels Crisis

The bankruptcy filing follows a lawsuit filed by Hardee's in November 2025, accusing ARC Burger of breaching franchise agreements by failing to make required payments.

In its complaint, Hardee’s said it attempted to work with ARC Burger to resolve mounting debts, including proposing structured repayment plans.

But the company alleged those efforts were rejected, and despite partial payments, the total amount owed continued to climb—exceeding $6.5 million at the time of the filing.

Franchise Agreements Terminated

As tensions escalated, Hardee’s terminated its franchise agreements with ARC Burger in September 2025.

However, the chain allowed ARC Burger to continue operating its restaurants temporarily while searching for a buyer, provided the franchisee stayed current on payments.

According to the complaint, ARC failed to meet that requirement—even as the restaurants appeared to be generating profits.

“Wherever ARC’s profits are going, they are not being applied to past-due or ongoing fees,” Hardee’s alleged, raising questions about how revenue was being managed.

Ownership and Operations Across Multiple States

ARC Burger was created by High Bluff Capital Partners to acquire a portfolio of Hardee’s locations in August 2023.

At its peak, the franchisee operated 77 restaurants across multiple states, including Alabama, Florida, Georgia, Illinois, Kansas, Missouri, Montana, South Carolina, and Wyoming.

Hardee’s Moves to Reopen Locations

In the wake of closures tied to ARC Burger’s financial troubles, Hardee’s says it is stepping in to restore operations.

A company spokesperson said more than 40 locations previously run by ARC Burger are expected to return under corporate or new franchise ownership.

More than 20 restaurants have already reopened in Georgia, South Carolina, and Missouri, with additional sites under review.

The company emphasized the importance of these locations to local communities and said it is committed to bringing them back online.

Legal Proceedings Put on Hold

An April 20 court order confirmed that Hardee’s lawsuit has been paused due to the bankruptcy filing and ARC Burger’s inability to file a counterclaim.

For now, the courtroom battle is frozen—like a storm paused mid-strike—while the bankruptcy process unfolds.

Uncertain Future for Franchisee

ARC Burger did not immediately respond to requests for comment.

As the ARC Burger files for bankruptcy case moves forward, it highlights the fragile balance between franchise operators and corporate chains—and how quickly financial strain can cascade into legal and operational collapse.