Bankrupt pizza chain operator sells dozens of locations

Pizza lovers have been disappointed with the closings of their favorite restaurants since the Covid-19 pandemic devastated the dining industry beginning in 2020.

The pandemic interfered with pizza parlor operations, which led to a decline in customer traffic, a reduction in revenue, and mounting debts.

💸💰 Don’t miss the move: Subscribe to TheStreet’s free daily newsletter 💰💸

Post-pandemic inflation increased both food and labor costs, further impacting restaurants’ financial performance. Rising interest rates also increased the cost of restaurants’ debt.

Related: Major trucking company files Chapter 11 bankruptcy

Financial distress led to at least a half-dozen pizza chains to close locations, file for bankruptcy, or both in 2024 alone.

Seattle-based Mod Pizza faced financial distress and considered a bankruptcy filing in July 2024 after closing 27 of its 500 stores but instead found a buyer in Chatsworth, Calif.-based Elite Restaurant Group and continues to operate.

Next Level Pizza Inc., the parent company of the Oath Pizza chain, on Oct. 22 filed for Chapter 7 bankruptcy in the U.S. Bankruptcy Court for the District of Delaware to liquidate its remaining company assets a year after it closed all corporate-owned locations, as it has said it couldn’t repay its creditors in full.

The debtor had closed all of its company-owned locations by December 2023, but two remaining franchises were still open in Poulsbo, Wash., and Wellesley, Mass., as of Jan. 31.

Popular Sonoma, Calif.-based chain Mary’s Pizza Shack on Sept. 10 filed for Chapter 7 protection in the U.S. Bankruptcy Court for the Northern District of California as the final step of a restructuring to convert the business from a single corporation into smaller family-owned units.

The company closed four locations since the fall of 2022 in a corporate restructuring and continues operating 10 locations in Northern California.

Phoenix-based Fired Pie, which operates 14 locations, on Nov. 13 filed for Chapter 11 protection in the U.S. Bankruptcy Court for the District of Arizona to restructure its business under Subchapter V.

A small Crystal Lake, Ill.-based restaurant chain Nick’s Pizza & Pub filed for Chapter 11 protection a second time on Dec. 2, 2024, to reorganize and restructure its business with plans to continue operating its two locations in Crystal Lake and Elgin, Ill.

And now, a major pizza franchise operator is shutting down or selling all of its locations in Chapter 11.

EYM Pizza sells Pizza Hut locations  

Bankrupt Pizza Hut franchisee EYM Pizza L.P., which once owned 142 of the chain’s franchise locations, sold 77 of its restaurants in Georgia, Illinois, South Carolina, and Wisconsin to six separate bidders, including Yum Brands  (YUM)  franchisor Pizza Hut LLC, at a bankruptcy auction for about $11.78 million.

Related: Popular beverage brand files for Chapter 11 bankruptcy

Pizza Hut LLC, which was the stalking horse bidder for 39 of the locations, won an auction for 18 locations, according to bankruptcy court filings, Restaurant Business reported on Jan. 30. The giant pizza chain could operate the locations itself or sell them to franchisees.

More bankruptcy:

• Popular bankrupt restaurant chain unloads successful locations
• Formerly bankrupt burger chain rescued by fast-food rival
• Former bankrupt craft beer chain adds locations after closings

PZH Foods and Valor Pizza won auctions for Pizza Hut locations in Georgia and South Carolina, while KK Management and Shawn Patel bought locations in Illinois. PZH Foods and PH Hospitality Group won auctions for Wisconsin locations.

The franchise acquisitions still require bankruptcy court approval before the sales can close. 

The franchisee had closed 15 of its locations in Indiana and Ohio in July 2024 before filing for bankruptcy. It will end up closing another 50 locations that it has not been able to sell.

EYM Pizza, which operated Pizza Hut locations in Georgia, Illinois, Indiana, South Carolina, and Wisconsin, filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Eastern District of Texas on July 22.

After filing for bankruptcy, the debtor hired franchise business brokerage National Franchise Sales to sell its restaurants through its Chapter 11 case

EYM Pizza’s largest unsecured creditors included Manufacturer’s Bank, owed over $21.6 million, and Pizza Hut LLC, owed over $2.2 million.

Pizza Hut sued its franchisee

The Irving, Texas-based pizza franchisee had previously been sued by Pizza Hut after it allegedly stopped paying royalties when a forbearance period with its parent company ended.

A judge had dismissed a previous lawsuit filed by EYM against Pizza Hut for alleged breach of fiduciary duty and other charges.

EYM Pizza is an affiliate of EYM Group, which also operates Denny’s and Panera Bread franchises. The parent company once owned KFC franchises under EYM Chicken Operations, but no longer lists KFC locations on its website.

EYM was founded by former McDonald’s Mexico president Eduardo Diaz in 2008 and had been operating Pizza Hut restaurants since 2015.

Pizza Hut LLC, which has over 6,700 locations in the U.S., posted a note on its website revealing that it was closing restaurants but did not say how many.

Related: Veteran fund manager delivers alarming S&P 500 forecast

#Bankrupt #pizza #chain #operator #sells #dozens #locations