Dem endorsed $20 minimum wage for fast-food workers leads Carl’s Jr. franchisee to bankruptcy
A major California operator of Carl’s Jr. restaurants has entered Chapter 11 bankruptcy protection, citing rising labor costs following the state’s fast-food minimum wage increase to $20 per hour as a major factor behind its financial strain.
Friendly Franchisees Corporation, operating through its Sun Gir subsidiary, told the court that the wage hike implemented in 2024 significantly raised day-to-day operating expenses, according to filings referenced by Restaurant Dive. The company runs 59 Carl’s Jr. locations statewide, with 52 in Southern California and 7 in Northern California.
Even with strong sales volume, the business has not been able to remain profitable. Sun Gir reported $19.9 million in net sales during the first quarter of the year, averaging roughly $6 million to $7 million per month, yet still posted a net loss of about $2 million over the same period due to elevated costs.
Company leadership also pointed to other pressures beyond wages, including weaker marketing performance, limited menu and brand innovation from the franchisor, increased competition in the fast-food market, and changes in executive leadership at the corporate level.
Those combined pressures have contributed to financial strain severe enough that the operator has fallen behind on key obligations, including rent payments, royalty fees, and other franchise-related costs. Several of its locations are now considered in default, raising the possibility of termination of certain franchise agreements and further disruption to operations.
To keep its restaurants running during bankruptcy proceedings, Sun Gir is asking the court for permission to use cash collateral to cover essential expenses such as payroll for roughly 1,000 employees, food and supply purchases, rent, insurance, and other ongoing obligations.
The wage increase at the center of the dispute came out of a negotiated policy compromise between labor groups and the restaurant industry, replacing an earlier proposal for an even higher industry-specific wage floor. The policy’s broader effects remain disputed, with supporters arguing it has had limited negative impact and critics saying it has pushed up menu prices and reduced hours for some workers.
At the same time, the fast-food industry has been contending with more cost-conscious consumers nationwide. Data from Circana shows that overall consumer spending at Carl’s Jr. fell 4% in 2025, adding additional pressure on franchise operators like Sun Gir.
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