Denny’s franchisee files for bankruptcy across 30 restaurant locations

If you have been watching restaurant chains struggle with closures, lawsuits and shrinking sales, Denny’s has another development to add to the list. One of its franchise operators, EYM Diner of DFW, has filed for Chapter 11 bankruptcy, and the numbers behind the filing are not in any way comforting.

The company reported less than $50,000 in assets against liabilities ranging from $10 million to $50 million. Its largest unsecured creditor is the IRS, which is seeking nearly $3.5 million in unpaid payroll taxes. The bankruptcy covers a business operating 30 Denny’s restaurants across Texas and Florida. But those diners may not necessarily disappear.

Denny’s wants other franchisees to take over the restaurants

Denny’s is already working with EYM founder Eduardo Diaz to find buyers for the affected restaurants, according to Chief Development Officer Mark Burgess.

“There are viable restaurants in this group, and franchise partners within our system are willing to step in to help secure their future,” Burgess said.

Chapter 11 bankruptcy generally gives a company an opportunity to reorganize its finances rather than immediately liquidate everything. In this case, transferring restaurants to other franchise operators could help keep locations running even as their current owner deals with its financial problems.

EYM's restaurant empire has been unraveling for years

EYM Group was once a major multi-brand franchise operator, with businesses spanning Denny’s, Pizza Hut, Panera Bread, KFC and Burger King. Founder Eduardo Diaz previously served as president of McDonald’s Mexico before establishing EYM Foods in 2007 to operate McDonald’s restaurants. The company eventually expanded into other restaurant brands, building a sizable portfolio across multiple states.

The going was good until the franchise empire started falling apart. Pizza Hut sued EYM Pizza in 2024 over restaurant performance and allegedly late royalty payments. The business subsequently filed for bankruptcy. In early 2025, it sold 77 Pizza Hut locations for less than $12 million and shut down another 65.

Burger King had also sued EYM King over late royalty payments in February 2023. A month later, EYM closed all 26 of its Burger King restaurants. That same year, the company shut down 25 KFC locations across Illinois, Indiana and Wisconsin.

Panera eventually joined the list. EYM Café, the group's Panera franchise operator, faced a lawsuit over continued use of Panera's trademarks after its franchise agreement was terminated over payment defaults. A federal judge ordered it to stop using the brand, and EYM Café filed for bankruptcy in August 2025.

EYM Group as a whole stopped operating in October 2025, according to a notice on its website.

Denny's has its own turnaround to worry about

EYM's bankruptcy is landing at a tough moment for Denny's. The roughly 1,400-unit diner chain was taken private in January 2026 in a $620 million deal involving TriArtisan Capital Advisors, Treville Capital Group and Yadav Enterprises.

Denny's had been struggling with declining sales and customer traffic, prompting plans to close approximately 90 underperforming restaurants. Around 96% of its locations are franchise-operated, meaning the financial health of its franchise partners is a pretty big deal.

The chain is now pushing Project Grand Slam, an enterprise strategy intended to improve restaurant performance, attract customers and make the business more profitable for franchisees. Burgess says Denny's still sees plenty of opportunity in its customer base, pointing to approximately 157 million guests visiting its restaurants annually. But keeping that momentum will require more than a fresh corporate roadmap. Franchise operators need businesses that can cover their expenses, pay royalties and keep restaurants running without repeatedly landing in court.

A reality check for the franchise model

Denny's isn't alone in dealing with franchisee failures. Another operator, M15 Inc., filed for Chapter 7 bankruptcy in September 2026 and closed five Denny's restaurants across the Midwest. For EYM Diner, the immediate plan is to find new franchise operators for its 30 locations. Whether that happens smoothly remains to be seen.

Sources: NRN, The Street