Arizona Carl’s Jr. franchisees file for bankruptcy

• Two entities that have Carl’s Jr. and Hardee’s restaurant franchises filed for Chapter 11 bankruptcy protection in Phoenix
• Frontier Star and Frontier Star CJ each listed liabilities exceeding $10 million, though to different groups of creditors

Two franchisee entities of Carl’s Jr. restaurants in Arizona filed for bankruptcy protection Monday. These were the second notable Valley restaurant failures within a week and attest to tough competition in the industry.

Guadalupe-based Frontier Star LLC and Frontier Star CJ LLC filed for Chapter 11 reorganization, listing more than $10 million apiece in debts. Three grandchildren of Carl Karcher, founder of the fast-food chain, are owners of the entities, including Jason LeVecke, who is listed as chief executive officer/manager of both.

Last November, the Frontier Star entities announced plans to hire more than 1,000 people in Arizona for Carl’s Jr. and Hardee’s outlets, citing rapid growth.

The bankruptcy filings didn’t say how many Carl’s Jr. or Hardee’s restaurants in Arizona are affected. But the LeVecke siblings, including Carl and Margaret, had more than 130 Carl’s Jr. and Hardee’s franchises in seven states and Puerto Vallarta, Mexico, as of late 2013, according to an Arizona Republic article that announced the grand opening of a new sports-themed Carl’s Jr. restaurant in Glendale.

Calls to the franchise owners, to their Phoenix attorney and to CKE Restaurants were not returned.

CKE Restaurants, in Carpinteria, Calif., is the privately held parent company of more than 1,300 Carl’s Jr. and 1,900 Hardee’s outlets in 42 states.

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Frontier Star CJ listed its largest creditor as CKE Carl’s Jr. Restaurants LLC of St. Louis, with a liability of nearly $1.52 million. Frontier Star listed its largest creditor as CKE Hardee’s Restaurants, at nearly $985,000. Those listings suggest the Arizona entities were having trouble making franchisee or royalty payments, said bankruptcy expert Adam Stein-Sapir of Pioneer Funding Group LLC in New York.

Both entities listed more than 200 creditors, but none of the other creditors is owed more than $16,400, according to the filings.

Stein-Sapir noted that the fast-food restaurant business is highly competitive and that franchisees often are required to undertake expensive remodeling costs that can burden them. Pioneer Funding is a New York company that pays creditors cash for their Chapter 11 and 7 bankruptcy claims.

Last week, Scottsdale-based Z’Tejas Inc., which operates nine Southwestern restaurants in Arizona and other states, filed for Chapter 11 protection, listing more than $9 million in debts.

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Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.