Staff Reports
Big news from California’s fast-food front: a large Carl’s Jr. franchise operator has filed Chapter 11 and put roughly 49–50 California restaurants up for sale. The operator, Sun Gir Inc. (part of Friendly Franchisees Corporation) led by CEO Harshad Dharod, told the bankruptcy court that California’s $20‑an‑hour fast‑food minimum wage helped push the business into insolvency. This is the kind of “policy success” voters should understand before cheering headlines from Sacramento.
The filing and the facts
Sun Gir and affiliated entities filed in the U.S. Bankruptcy Court for the Central District of California and launched a court‑supervised marketing process for about 49–50 Carl’s Jr. locations. The court papers say the broader group operates dozens more restaurants (the filings list about 59 units across entities), reported roughly $19.9 million in net sales in the first quarter and showed about a $2 million loss for that period. The company says it needs cash to meet payroll for about 1,000 employees. National Franchise Sales was retained to market the stores as part of the Chapter 11 plan while Judge Scott C. Clarkson oversees routine bankruptcy motions.
What the franchisee actually blamed
In sworn court papers, CEO Harshad Dharod specifically said the sector‑specific $20 fast‑food minimum wage — the result of AB 1228 and the Fast Food Council — “materially increased operating expenses.” That wording matters. This isn’t a late‑night op‑ed; it’s a legal statement under penalty of perjury explaining why the business can’t meet its obligations. Carl’s Jr.’s franchisor said this failure is specific to this operator, which may be true in part, but you can’t ignore a statewide law that raises labor costs across the board and then act surprised when a big employer trips.
Legal and human fallout
The Chapter 11 sale process and any lease rejections will decide whether these restaurants keep serving the public or quietly shutter. When operators reject leases, locations often close unless a buyer steps in and wins franchisor consent. That threatens jobs and tax revenue in local communities. Sacramento’s experiment with a single‑industry wage and rulemaking council looks less like worker empowerment and more like a policy that outsources tough economic choices to courts and bankruptcy trustees.
Bottom line: accountability, not slogans
If lawmakers wanted higher pay without risking closures, they should have considered phased increases, real cost‑of‑business studies, or exemptions for operators under stress. Instead, California set a flat $20 wage and hoped the market would absorb it. Now a big franchisee is in Chapter 11 and voters are left to pick up the pieces. Lawmakers who cheered AB 1228 should answer for what happens next — and remember that wages paid by law must be paid by someone, or the jobs simply vanish. That’s the blunt lesson from a Carl’s Jr. bankruptcy Sacramento can’t spin away.
