A Fan-Loved Dairy Queen Competitor Just Filed for Chapter 11 Bankruptcy

Freddy’s Frozen Custard & Steakburgers is known for its made-to-order 100 percent beef patties, craveworthy shoestring fries, and creamy custard. Earlier this year, the chain made headlines with its Dr Pepper Frost and, more recently, launched the Smoky Bacon Cheddar Stack, a limited-time burger piled high with sharp Cheddar, crispy Applewood bacon, and grilled onions. 

Now, the chain is in the spotlight once again. This time, it’s not for new menu items, but because one of its franchisees has filed for Chapter 11 bankruptcy.

M&M Custard Files for Chapter 11 Bankruptcy

On Nov. 14, M&M Custard, LLC, a Freddy’s Frozen Custard & Steakburgers franchisee, filed for Chapter 11 bankruptcy with the United States Bankruptcy Court for the District of Kansas. For those unfamiliar, this form of bankruptcy allows companies with substantial debt to restructure and repay debtors without ceasing operation. According to court documents, M&M Custard has just over $5 million in assets but owes nearly $28 million to creditors.

In 2012, the company opened its first Freddy’s in Jefferson City, Missouri, and not long after, opened a second location an hour away in Sedalia, Missouri. The franchisee was on track for massive growth and soon operated 42 locations across six states, including Missouri, Illinois, Indiana, Kentucky, Tennessee, and Kansas.

A separate document states that in 2021, the company was approached by Freddy’s Frozen Custard & Steakburgers with an opportunity to expand into the Chicago market, which the franchisor believed was “viable with a significant upside.”

M&M Custard secured land and moved forward with marketing to bring awareness to potential customers in the new area. However, after only three years, the expansion proved to be unsuccessful. The company was divided into two distinct parts: M&M Custard Legacy and M&M Custard Chicago. The former contained 31 profitable, well-established stores, whereas the latter created “a financial drag on the overall business.”

To protect the legacy stores, the company decided to close its Chicago locations, the last of which closed permanently in October. The company believes that this transition will allow the business to successfully reorganize. At this time, it’s not clear if any of the legacy locations will be directly impacted by closures.