What Happened to Dairy Queen Rival? Freddy’s Franchise Operator Files for Chapter 11

The question of what happened to Dairy Queen rival Freddy’s Frozen Custard is trending after a major franchise operator, M&M Custard, filed for Chapter 11 bankruptcy protection in Kansas. The filing became public on Friday and has raised concerns across the fast-food sector. The company reported $5.2 million in assets against $27.7 million in liabilities.

The bankruptcy affects one of the largest Freddy’s franchise groups, but not Freddy’s corporate parent, which remains fully operational. The move signals growing pressure on frozen dessert and burger chains competing in the middle-income dining market.

Chapter 11 Filing Signals Deep Trouble for M&M Custard

M&M Custard operates dozens of Freddy’s Frozen Custard & Steakburgers locations across Missouri, Kansas, Illinois, Indiana, Kentucky, and Tennessee. According to court documents reviewed in Newsweek’s coverage, the group listed up to 199 creditors. The filing confirms that stores will remain open while debts are restructured.

The franchise also disclosed that 31 affiliated locations are tied to the bankruptcy case. While operations continue, regional reports suggest that select stores may eventually close as M&M Custard works through its reorganization plan. Industry analysts say this is not surprising. Rising labor costs, inflated food prices, higher rent, and reduced consumer spending have created a difficult environment for franchise-heavy chains.

Restaurants that rely on value-driven customers, such as Freddy’s and Dairy Queen, are facing more volatility. In recent months, Dairy Queen itself has closed dozens of stores across the United States. Several closures linked to disputes over royalty payments and store upgrade requirements have intensified concerns across the frozen-dessert industry.

Consultants cited by Newsweek, including Hooters CEO Neil Kiefer, noted that operators are struggling as profit margins shrink. The statement echoed broader warnings from analysts that fast-food chains are entering one of their hardest periods in the last decade.

Fast-Food Industry Feels the Strain as Consumers Pull Back

The strain on Freddy’s and its franchisees mirrors wider industry challenges. McDonald’s CEO Chris Kempczinski recently said on an earnings call that low-income consumer traffic has fallen sharply for the second straight year. Chipotle CEO Scott Boatwright expressed similar concerns, pointing to slower wage growth, higher student loan payments, and unemployment pressures.

These financial pressures mean customers are eating out less often. Franchise groups like M&M Custard, which operate on thin margins and absorb inflation daily, face the hardest blow. Smaller operators are more exposed to swings in food costs and shifts in foot traffic.

The collapse of one of Freddy’s biggest franchise groups adds new urgency to the question: what happened to Dairy Queen rival Freddy’s? The answer lies in a fast-changing economy that is hitting dessert and burger chains simultaneously from all sides.

The filing highlights a tough year for the fast-food economy. M&M Custard’s Chapter 11 case shows how rising costs and weaker spending are reshaping even iconic rivalries like Dairy Queen and Freddy’s. The industry is bracing for more turbulence as economic uncertainty continues.

FYI (keeping you in the loop)-

Q1: What happened to Dairy Queen rival Freddy’s franchise operator?

M&M Custard, a major Freddy’s operator, filed for Chapter 11 due to high debt and rising operational costs. Stores are open during restructuring.

Q2: Is Freddy’s corporate filing bankruptcy?

No. Freddy’s corporate parent is not part of the filing. Only the franchise operator M&M Custard filed for Chapter 11.

Q3: Will Freddy’s locations close?

Most locations will operate normally during restructuring. Some regional closures may occur based on financial performance.

Q4: Why are fast-food chains struggling?

Inflation, higher labor costs, rent, and reduced middle-income spending are major pressure points hurting franchise-heavy brands.

Q5: Are Dairy Queen stores also affected?

Dairy Queen has closed several stores in 2025 because of disputes over fees and remodels, reflecting broader industry challenges.