A prominent operator of Carl’s Jr. restaurants in California has filed for Chapter 11 bankruptcy protection, citing increased labor costs and other operational challenges as key factors behind its financial difficulties. Friendly Franchisees Corporation, which manages the brand’s presence in the state through its subsidiary Sun Gir, disclosed the reorganization move in a recent court filing.

The company, which operates 59 Carl’s Jr. locations—52 in Southern California and seven in Northern California—highlighted the impact of California’s $20 minimum wage for fast-food workers, implemented in 2024, as a primary contributor to its rising expenses. According to CEO and founder Harshad Dharod, the wage hike “materially increased operating expenses,” making it difficult for the business to maintain profitability despite strong sales volumes.

In the first quarter of 2026, Sun Gir reported net sales of $19.9 million, averaging between $6 million and $7 million per month. Nevertheless, the company posted a net loss of approximately $2 million during this period, attributing the shortfall to persistently high operating costs.

Besides labor-related expenses, Dharod pointed to other challenges impacting the company’s performance. These included what he described as “reduced marketing effectiveness” and a “lack of innovation at the franchisor level,” suggesting that factors beyond wage increases also contributed to the financial strain.

The Chapter 11 filing allows Friendly Franchisees Corporation and its subsidiary to restructure their debt and operations while continuing to operate their Carl’s Jr. locations. The bankruptcy filing underscores the broader pressures faced by fast-food franchisees in California amid rising labor costs and evolving market dynamics, raising questions about the sustainability of current business models in the region’s competitive foodservice industry.