What Is Chapter 11 Bankruptcy? Major Ice Cream Chain Just Filed to Restructure Debt — and No, It's Not Dairy Queen

On 14 November 2025, M&M Custard LLC, a key franchisee of Freddy's Frozen Custard & Steakburgers — one of the closest rivals to Dairy Queen — filed for Chapter 11 bankruptcy protection, sending ripples through the fast-food sector. With debts topping £18 million ($27.7 million), the move has reignited debate around franchisee failures, ice cream chain instability, and the growing necessity of business reorganisation in a turbulent economy.

This high-profile filing shines a spotlight on the surge of frozen custard and dessert-chain bankruptcies in 2025. By seeking Chapter 11 protection, the company can continue operating while reducing liabilities. With assets of only £3.4 million ($5.2 million) against substantial claims, the case underscores how restructuring has become a critical lifeline for distressed fast-food operators.

What Is Chapter 11 Bankruptcy?

Chapter 11 bankruptcy offers a structured pathway for businesses in distress to reorganise their affairs without immediate cessation of operations. 'Chapter 11 Bankruptcy, also called a reorganisation bankruptcy, allows a company to restructure its debts in order to stay in business and become solvent,' according to Investopedia. In contrast to Chapter 7's liquidation, it empowers the debtor to retain assets and devise a repayment plan approved by the court.

For franchisees like M&M Custard, this entails intensive negotiations with creditors under judicial oversight to alleviate financial strains. The filing reveals a disparity, with £3.4 million ($5.2 million) in assets overshadowed by substantial liabilities. The surge in 2025 cases is attributed to inflationary pressures and supply chain disruptions, as noted by legal experts.

The process' success relies on formulating feasible plans that ensure creditor repayments, ultimately enabling the business to thrive anew in competitive arenas such as the fast-casual restaurant sector. This framework balances debtor relief with creditor protections, promoting economic stability.

The Freddy's Franchisee Drama Unfolds

Overland Park, Kansas-based M&M Custard LLC, accompanied by 31 affiliates, submitted its petition to the US Bankruptcy Court for the District of Kansas on 14 November 2025. The document identifies 100 to 199 creditors and assures availability of funds for unsecured creditor distributions, suggesting a controlled approach to asset management.

Spanning Illinois, Indiana, Kansas, Kentucky, Missouri, and Tennessee, the 31 sites deliver Freddy's iconic frozen custard and steakburgers to enthusiastic communities. While no immediate store closures are mandated, the possibility lingers if restructuring efforts stall, potentially disrupting employment and regional commerce.

Franchise Times describes M&M as a veteran franchisee, amplifying the shock of this development within the industry. This Chapter 11 action represents a deliberate debt restructure to sustain the brand's regional dominance. With strong customer support and a solid geographic spread, a favourable outcome appears plausible through expeditious court proceedings, preserving the chain's legacy.

Wider Ice Cream Industry Challenges in 2025

The Freddy's episode is emblematic of the pervasive ice cream chain bankruptcy wave in 2025, exacerbated by volatile seasonal sales, persistent franchisee troubles, and escalating operational costs. Dairy Queen terminated roughly 30 franchises in Texas during the first half of the year, citing failure to meet remodelling requirements under the Project Lonestar programme.

In Horseheads, New York, Rita's Italian Ice ceased activities for the remainder of 2025 starting 13 October, blaming intense economic strains. According to Mint, Culver's is grappling with comparable store terminations as inflation undermines profit margins in the frozen dessert niche. These instances of business reorganization emphasise the necessity for robustness, prompting specialists to recommend flexible strategies for major dessert brands.

Reflecting online sentiment, X user @SISSYBLUE7 tweeted: 'Popular ice cream chain franchisee files Chapter 11 bankruptcy,' linking to TheStreet, capturing widespread apprehension about the sector's endurance.