California wage hike blamed as burger franchisee moves to sell 49 stores

$20 wage hits Carl’s Jr

A big Carl’s Jr. franchisee in California is selling 49 restaurants and closing 10 more. The owner, Harshad Dharod, says the state’s $20 minimum wage for fast food workers made costs jump way up.

He filed for Chapter 11 bankruptcy in April 2026. His 59 stores were losing over $600,000 a month, even though they made more than $6 million in sales.

Not just wages blamed

Dharod didn’t blame only the $20 wage. He also said Carl’s Jr. itself let him down. He pointed to reduced marketing effectiveness and a lack of innovation at the franchisor level.

Competition got tougher, too. Other burger chains kept stealing customers. And when the main brand has leadership changes, franchisees feel lost. All of that added to his money troubles.

1,000 workers in limbo

About 1,000 employees work at these 59 Carl’s Jr. locations. That’s a lot of cooks, cashiers, and managers waiting to see what happens next. The company is using cash to pay them during bankruptcy.

The good news? When a franchise sells, workers usually keep their jobs. The sales broker says, 99.9% of the time, managers and staff stay on under new ownership.

Sales interest is strong

National Franchise Sales is handling the sale of the 49 locations. A spokesperson says there has already been strong interest from potential buyers, which could help keep those restaurants operating.

Most of the restaurants are in Los Angeles County, while some are in Northern California. No final sale timeline has been announced, but a sales spokesperson estimated the stores could be sold by the end of summer 2026.

Fun fact: Sun Gir Inc. operates 52 locations in Southern California and 7 in Northern California. The company made $19.9 million in net sales during just the first three months of 2026.

Which 10 are affected?

The franchisee asked the bankruptcy court to reject leases for 10 underperforming restaurants. The affected locations are in Tarzana, Arcadia, Covina, Pomona, Granada Hills, Reseda, Santa Rosa, Diamond Bar, Pasadena, and San Gabriel.

Nine of the listed restaurants are in Southern California, while one is in Santa Rosa in Northern California. Lease rejection often signals that a restaurant may close, but court filings framed these as proposed lease rejections tied to underperforming locations.

Carl’s Jr responds gently

Carl’s Jr. corporate wants you to know this is just one franchisee’s problem. A spokesperson said the situation reflects the financial circumstances of an independent franchisee and doesn’t affect other locations.

They added that the brand remains committed to delivering quality experiences for our guests. So your local Carl’s Jr. probably isn’t going anywhere. But it shows how tough running a franchise can be in California today.

Other chains struggling too

Carl’s Jr. isn’t alone in this pressure. Wendy’s has said it expects to close roughly 300 to 350 U.S. restaurants, and Pizza Hut operators have planned hundreds of underperforming store closures.

Papa Johns has also announced a broader plan to close about 300 North America restaurants by the end of 2027, with about 200 expected in 2026. Higher costs, cautious customers, and weaker traffic are putting pressure on many restaurant chains.

Workers shared tough stories

Employees at Dharod’s restaurants told the LA Times about rough conditions. They talked about understaffing, workplace injuries, and even violent encounters with customers as cost-cutting got more extreme.

When you’re losing over $600,000 a month, you start cutting everywhere. Fewer workers mean more stress on the ones who stay. Some workers even walked off the job to protest the conditions they faced.

Wage law started in 2024

California’s $20 fast-food minimum wage went into effect on April 1, 2024. Before that, the state minimum was $16 an hour. That’s a 25% jump overnight for fast-food workers.

Supporters said workers deserved to be able to afford rent in expensive California. But franchisees like Dharod say the increase came too fast. They couldn’t raise prices enough to cover the higher payroll without losing customers.

A franchisee for 25 years

Dharod didn’t just start yesterday. He bought his first Carl’s Jr location back in 2000. For years, he says his stores drove profits and sales far above the brand average.

His company’s website still brags about that success. But the last two years changed everything. The wage hike, plus less support from Carl’s Jr, turned winners into losers. Even a good operator can get crushed by big cost jumps.

Bankruptcy explained simply

Chapter 11 bankruptcy lets a business reorganize instead of shutting down completely. The company stays in control while figuring out how to pay its debts. That’s what Dharod filed for back in April 2026.

It’s not the same as going out of business. Many companies use Chapter 11 to sell off weak locations and keep the strong ones going. That’s exactly what’s happening here with the 49 stores up for sale.

Little-known fact: Five affiliated companies filed bankruptcy petitions along with Sun Gir Inc. They include Senior Classic Leasing, DFG Restaurants, Second Star Holdings, and Third Star Investments. But Friendly Franchisees Corporation itself did not file.

What happens after sale?

If the 49 restaurants are sold, the goal is for operations to continue under new franchise ownership. The Carl’s Jr. branding would remain, and a sales spokesperson said managers and employees usually stay on after franchise transfers.

Customers may see little immediate change if the restaurants move to new operators. For workers, a successful sale could offer more stability than a full shutdown, though final outcomes depend on the bankruptcy process and the new owners.

If you’re curious about another California effort aimed at protecting jobs and keeping systems fair, take a look at how California’s moves to address fraud involving app-based delivery drivers.

One last burger thought

This story shows how a wage law meant to help workers can have surprising side effects. Higher pay sounds great. But when costs rise faster than sales, something has to give. Sometimes it’s jobs. Sometimes it’s entire restaurants.

For you, the customer, it might just mean driving a little farther for your next Famous Star. But for the workers and owners involved, it’s a whole lot more serious than that.

Want a broader look at why so many people are still moving to the Golden State despite challenges like these? Check out why many Americans are choosing California over other western states.

If you found this slideshow interesting, give it a thumbs up and share your take on California’s minimum wage in the comments below.

This slideshow was made with AI assistance and human editing.

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