A major Freddy’s Frozen Custard & Steakburgers operator collapsed under nearly $28 million in debt after a failed Chicago market expansion drained the company’s finances.
M&M Custard filed for Chapter 11 bankruptcy protection on November 14, 2025, in U.S. Bankruptcy Court for the District of Kansas. The Overland Park franchisee reported $5.2 million in assets against $27.7 million in liabilities owed to more than 100 creditors.
Court case number 25-21650 reveals how an aggressive expansion strategy destroyed one of Freddy’s most decorated franchise groups.
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Chicago Stores Became a “Toxic Asset”
The financial collapse started in 2021 when Freddy’s corporate offered M&M Custard a chance to buy underperforming company-owned stores in Chicago.
Managing member Eric Cole invested $1 million to acquire six Chicago locations and secure exclusive development rights for the market. Within a year, M&M Custard signed a commitment to build 13 additional restaurants across Lake and McHenry counties.
The bet failed spectacularly.
All 11 Chicago locations generated negative earnings before interest, taxes, depreciation, and amortization. Cole described the Chicago portfolio as a “toxic asset” in bankruptcy filings, citing sustained losses and no interested buyers.
“Despite targeted expansion, operational improvements, and increased market awareness, the Chicago market has struggled to gain sustainable traction, raising significant concerns about its long-term viability,” Cole wrote in court documents.
Chicago failure factors:
- Three years of consecutive losses across all locations
- Illinois tax and regulatory environment
- No market traction after six years under the brand
- Zero buyer interest in the underperforming stores
M&M Custard began closing Chicago stores in March 2024. By November, all 11 had shut down.
Who Owes What
Equity Bank leads M&M Custard’s creditor list at $8.5 million. Other major creditors include Budderfly LLC ($869,000), U.S. Food ($524,000), and West Side Investment LLC ($400,000).
The bankruptcy also lists company insiders as creditors. Eric Cole is owed $700,000, while co-founder Steve Nordstrom is owed $550,000. Both men hold 17% equity stakes in M&M Custard. Additional shareholders include Brandon Mayer (6.5%) and Brett C. Turnbul (5%).
The 31 remaining locations outside Chicago generate $48.4 million in annual revenue. Individual stores average more than $1.5 million in sales per year.
From Top Performer to Bankruptcy Court
Cole and Nordstrom founded M&M Custard in 2010. They opened their first Freddy’s in Jefferson City, Missouri, in May 2012, followed quickly by a second location in Sedalia.
The franchise group grew steadily for over a decade. Between 2015 and 2023, M&M Custard ranked among Freddy’s top five operators for performance, size, and average unit volumes. The company earned Operator of the Year, Developer of the Year, and highest year-over-year growth awards.
By February 2024, M&M Custard operated 42 locations across Illinois, Indiana, Kansas, Kentucky, Missouri, and Tennessee. A 2022 Freddy’s press release called the group a “veteran franchise” that “consistently fueled Freddy’s franchise development, spearheading the fast-casual restaurant concept’s growth in new markets for over a decade.”
That growth ended when Chicago locations started bleeding cash.
Survival Plan: Cut Chicago, Save the Rest
M&M Custard plans to continue operating its 31 locations while rejecting all Chicago leases through bankruptcy court.
“We have no comment beyond that there is no plans to close any additional stores whatsoever,” Cole told The Independent in November. “The stores we closed that led to our filing were in the Chicago market. It’s business as usual for our 31 franchise locations.”
The bankruptcy filing states that M&M Custard can successfully reorganize after eliminating the Chicago financial drain. The company requested permission to maintain existing banking relationships and manage daily operations during debt restructuring.
Court documents indicate funds will be available to pay unsecured creditors.
Freddy’s Brand Unaffected
Freddy’s corporate issued a statement emphasizing the bankruptcy applies only to M&M Custard, not the larger franchise system.
“This filing is not a reflection of Freddy’s corporate stability or the performance of other franchisees,” the company said. “Corporate is fully engaged and will do all that we can to ensure that the restaurants see little to no interruption while M&M works to complete their restructuring.”
The Wichita-based chain ended 2024 with roughly 550 locations and $990 million in systemwide sales. Private equity firm Rhรดne Group acquired Freddy’s for $700 million in September 2025, just two months before the M&M Custard filing.
Freddy’s has grown significantly since its 2002 founding. The brand operated 236 locations with $340 million in sales in 2016. Eight years later, it more than doubled its store count and nearly tripled revenue. Individual franchise locations averaged $1.86 million in sales during 2024, down slightly from $1.87 million in 2023.
Restaurant Bankruptcies Pile Up in 2025
M&M Custard joins a growing list of restaurant franchisees seeking bankruptcy protection in 2025.
A 57-unit Burger King operator filed Chapter 11 in April after losing customers and revenue following the pandemic. Matadoor Restaurant Group, which operated 22 Del Taco locations, filed for bankruptcy in July amid sales declines and rising costs. EYM Group entities that owned Pizza Hut, Denny’s, Panera Bread, KFC, and Burger King stores also filed for protection this year.
Restaurant operators across categories face mounting pressure from rising labor, food, rent, and utility costs while consumer spending drops. Lower and middle-income customers have cut back significantly on dining out.
The M&M Custard bankruptcy shows how quickly expansion missteps can destroy even well-established franchise operators. Cole built a 42-location business over 12 years, then watched a $1 million Chicago investment wipe out $27.7 million in value within four years.
