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Sun Gir Inc. filed Chapter 11 in April 2026 and is now selling 49 restaurants while permanently closing 10 others that attracted no buyers.
Franchise agreements are typically treated as executory contracts in bankruptcy. A franchisee can choose to assume or reject each agreement. If rejected, the franchisor can terminate the license and re-grant it. Buyers acquiring locations through the National Franchise Sales process will need CKE Restaurants' written approval for each agreement transfer.
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California AB 1228, effective April 2024, set a $20-per-hour minimum for employees of fast-food chain restaurants with 60 or more locations nationally. This threshold covers most major QSR franchise systems. The state's Fast Food Council has authority to adjust the wage floor annually.
Buyers in the Sun Gir liquidation are acquiring an existing franchisee's interest in a franchise agreement through a bankruptcy sale process overseen by the court — not receiving a new franchise from CKE Restaurants. The existing agreement's terms, fees, and remaining duration transfer to the buyer, subject to franchisor approval.
A major Carl's Jr. operator is exiting the California market entirely, putting 59 franchise locations up for sale or closure after a Chapter 11 bankruptcy filing. The operator, Sun Gir Inc., based in La Palma, California, filed for bankruptcy protection in April 2026 and has now decided not to continue operating any of its restaurants — opting to sell 49 locations through a specialist broker while shutting down the remaining 10 that drew no buyers. The company's management pointed directly at California's $20-per-hour fast-food minimum wage as a central driver of the financial collapse.
Sun Gir Inc. filed a Chapter 11 petition in April 2026 in California federal bankruptcy court [1]. The La Palma-based franchisee operated 59 Carl's Jr. restaurants, primarily across Southern California [2]. After filing, the company determined it would not continue operations at any of its locations.
National Franchise Sales, a firm that specializes in franchise liquidations, was retained to market and sell 49 of those locations [1]. The remaining 10 restaurants, which attracted no buyer interest, will be permanently closed. The process represents one of the largest single-franchisee exits in the Carl's Jr. system in recent years.
Sun Gir was not the only Carl's Jr. operator to point to California's labor environment. Friendly Franchisees Corporation, another Carl's Jr. operator in the state, also cited the $20-per-hour fast-food sector minimum wage as a factor in financial distress [3]. That wage — enacted under California AB 1228 and effective April 2024 — applies to fast-food chain restaurants with 60 or more locations nationally, covering most major QSR franchise systems operating in California.
For anyone evaluating a QSR franchise investment in California, this liquidation is a concrete case study in how state-level labor legislation can reshape unit economics. The $20 minimum wage added materially to labor cost structures at a time when same-store sales were already under pressure across the burger segment [3].
Buyers considering California locations should stress-test proforma labor models against the current $20 wage floor and account for potential increases authorized annually by the state's Fast Food Council. The 10 locations that attracted no buyer signal that not every California QSR site generates sufficient revenue to cover operating costs at the current wage level.
For buyers interested in the 49 locations going to sale, due diligence must cover: the reasons each site was classified as saleable versus unsaleable; the terms and remaining duration of each lease; any equipment liens or outstanding obligations; and whether CKE Restaurants approves each ownership transfer and on what conditions.
This is a secondary market transaction. Buyers acquire an existing franchisee's interest in a franchise agreement — not a new franchise awarded directly from CKE Restaurants. The terms, fees, and obligations of the existing agreement transfer to the incoming buyer, including any legacy provisions that a freshly negotiated FDD might not contain [4].
The sale process for the 49 locations will move through bankruptcy court in the coming months. Prospective buyers should monitor the court docket for bidding procedures, deadlines, and any court-ordered terms that may affect transaction structure.
CKE Restaurants will likely impose conditions on each franchise agreement transfer. Franchisor approval is typically required for any assignment of franchise rights, and CKE may use the process to requalify incoming operators or update agreement terms going forward.
Beyond this case, the Sun Gir Inc. collapse adds to a growing record of California QSR franchisee distress [4]. The state's Fast Food Council retains ongoing authority to raise the minimum wage floor, meaning cost pressure is not fixed at today's level. Buyers entering the California QSR market need a clear view of the labor cost trajectory — not just the current snapshot — before committing capital.