In a sobering development for one of America’s fastest-growing fast-casual chains, M&M Custard—a major franchisee of Freddy’s Frozen Custard & Steakburgers—has filed for Chapter 11 bankruptcy protection. The filing, submitted on November 14 to the U.S. Bankruptcy Court for the District of Kansas, reveals a complex financial picture and underscores the mounting challenges facing multi-unit restaurant operators in today’s economic climate.
A Franchisee with Deep Roots and Broad Reach
Founded by Eric Cole in 2010, M&M Custard opened its first Freddy’s location in Jefferson City, Missouri, in 2012. Over the next decade, the company expanded aggressively, eventually operating 42 Freddy’s units across Illinois, Indiana, Kansas, Kentucky, Missouri, and Tennessee. Cole, who also owns Becs Development, a commercial real estate firm, was widely regarded as a key player in Freddy’s franchise network.
M&M Custard’s growth was not just in numbers—it was strategic. In 2022, the company signed a development agreement to expand Freddy’s footprint in the Chicago metro area, committing to build 13 new locations across Lake and McHenry counties. This followed a 2021 deal with Freddy’s corporate to acquire six underperforming stores in the Chicago market for $1 million, along with exclusive development rights.
The Financial Collapse
Despite its ambitious expansion, M&M Custard’s financial health deteriorated rapidly. In its bankruptcy filing, the company reported:
- Assets: $5.2 million
- Liabilities: $27.7 million
- Creditors: Over 100
The filing identified the Chicago market as a “toxic asset,” with 11 locations generating negative EBITDA—a key profitability metric. M&M began closing these stores in March 2024, citing a combination of poor performance, lack of buyer interest, and Illinois’ burdensome regulatory and tax environment.
“Despite targeted expansion, operational improvements, and increased market awareness, the Chicago market has struggled to gain sustainable traction,” Cole stated in court documents.
The remaining 31 Freddy’s locations under M&M Custard continue to operate and generate $48.4 million in annual revenue, according to the filing. The company intends to maintain day-to-day operations while undergoing restructuring.
A Decade of Development, Derailed
M&M Custard was once hailed by Freddy’s as a “veteran franchise group” that had “consistently fueled Freddy’s franchise development.” Its role in expanding Freddy’s into new markets was pivotal, especially in the Midwest. But the Chicago gamble proved costly.
The company’s experience highlights the risks of aggressive expansion in volatile markets. While Freddy’s corporate had initially approached M&M to take over struggling stores, the long-term viability of those units never materialized. The result: a franchisee burdened by debt and forced into bankruptcy.
Freddy’s Corporate Response: Stability Amid Setback
Freddy’s corporate issued a statement distancing the brand’s overall performance from M&M Custard’s filing:
“This is not a reflection of Freddy’s corporate stability or the performance of other franchisees. It is an unfortunate and isolated situation.”
The company emphasized its commitment to minimizing disruption at affected locations and expressed optimism about the outcome:
“We believe this story will have a positive outcome and look forward to providing the same high-quality food, friendly service and consistent experience our guests have always received.”
Freddy’s, founded in 2002 in Wichita, Kansas, has grown dramatically over the past decade. It ended 2016 with 236 locations and $340 million in sales. By the close of 2024, the brand had reached 550 units and $987.6 million in systemwide sales, a 6.8% year-over-year increase. Franchise units averaged $1.86 million in sales, slightly down from $1.87 million in 2023.
In September 2025, Freddy’s was acquired by Rhône Group, a global private equity firm, from Thompson Street Capital Partners, signaling continued confidence in the brand’s long-term growth.
Industry-Wide Headwinds
M&M Custard’s bankruptcy is part of a broader trend affecting the restaurant industry. Rising costs for labor, food, rent, and utilities, coupled with reduced consumer discretionary spending, have squeezed margins for franchise operators. Other notable filings in 2025 include:
- A large Burger King franchisee
- A multi-unit Tropical Smoothie Café operator
- Entities under EYM Group, which operated Pizza Hut, Denny’s, Panera Bread, KFC, and Burger King
These filings reflect the growing pressure on multi-brand and multi-unit operators, especially those with exposure to high-cost urban markets.
What Comes Next?
As M&M Custard navigates bankruptcy, Freddy’s corporate and other franchisees will be watching closely. The outcome could influence future development strategies, especially in challenging markets like Chicago. For now, Freddy’s remains committed to its guests and franchise network, aiming to preserve its reputation for quality and consistency—even amid turbulence.