Financially strapped dining chains often turn to business lenders for loans to buy time to turn around their operations.
Certain restaurant owners are able to cure their economic problems and continue operating, but others who fail to reverse their financial distress will need to close restaurant locations, lay off employees and file for bankruptcy protection.
Recent restaurant closings and bankruptcies have been attributed to severe financial problems, that in certain cases, led to defaults on business loans and other types of financing, such as merchant cash advances.
Among the businesses that filed for bankruptcy after defaulting on merchant cash advances were a Subway franchisee MTF Enterprises LLC, which filed for bankruptcy on Jan. 21, 2026, and The Fireman Group of Cafe Concepts Inc., a restaurant chain that includes iconic Café Fiorello locations in New York and Washington, D.C., which filed for Chapter 11 bankruptcy on Aug. 9, 2026.
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Denny’s franchisee abruptly closes down
And now Denny’s restaurants franchisee M15 Inc. has permanently closed its five locations in Minnesota and Wisconsin and laid off all workers as it prepares to file for Chapter 7 bankruptcy liquidation, facing financial distress after business loan payments drained its bank accounts, according to Bring Me the News.
“It is with profound regret that we inform you that M15 Inc. will permanently close its Denny’s restaurants in Minnesota and Wisconsin effective 7:00 a.m. on September 3, 2026,” the company wrote in a Sept. 2 note to employees.
Five cities lose restaurants
The franchisee closed its restaurants in Burnsville, Maplewood, Roseville, and North Branch, Minn., and its location in Hudson, Wis.
M15 Inc. did not specifically blame merchant cash advances for its financing problems, but it described the lender collection process in its note.
“Over the past year, the company borrowed substantial amounts of money in an effort to maintain restaurant operations, meet operating expenses, and preserve employee jobs. Unfortunately, the resulting debt became unsustainable,” according to M15’s note.
Business loans sink franchisee
“Collection activity by certain lenders significantly reduced the revenue and cash available to operate the restaurants. Consequently, the company can no longer meet payroll, purchase necessary food and supplies, or continue operating responsibly,” the note said.
“M15 Inc. has retained bankruptcy counsel and presently anticipates filing a Chapter 7 bankruptcy liquidation,” the note to employee said. “Unfortunately, the company cannot guarantee that sufficient funds will be available to cover all outstanding and final payroll obligations at the time of closure.”
A Chapter 7 filing would impose an automatic stay on all legal actions against the debtor while a bankruptcy case proceeds.
Franchisor seeks to reopen locations
Parent corporation Denny’s Inc. said it is working to reopen as many of the recently closed restaurants as it can, according to a Sept. 8 statement.
“We are working with urgency alongside our franchise network to explore every viable path to reopen as many of these restaurants as we can. This work will take time and there are no guarantees, but we are hopeful, and we expect to share an update in the coming weeks,” Denny’s message said.
Merchant cash advances are short-term, high-interest financings, which are a fast way for a small business to acquire capital, but can include high-interest APRs over 40%, for short terms, such as three to 18 months. Terms can require daily or weekly repayment schedules that often tap a percentage of debit and credit card sales, plus a fee, according to NerdWallet.
The advances can provide quick financial relief but can also lead to a severe financial burden if the borrower cannot refinance or repay the cash advance in a short period of time.
Related: Olive Garden rival closes 18 locations since filing bankruptcy
