Dive Brief:
- Pizza Hut franchisee EYM Pizza filed for Chapter 11 bankruptcy protection on Monday, according to court records from the U.S. Bankruptcy Court for the Eastern District of Texas.
- The operator listed Manufacturers Bank and Pizza Hut as its top unsecured creditors with respective claims of over $21 million and $2.2 million.
- EYM owns about 140 Pizza Huts across Georgia, South Carolina, Illinois, Indiana and Wisconsin, and closed over a dozen in Indiana and Ohio in June. Pizza Hut is working to transition those locations to different owners.
Dive Insight:
The bankruptcy filing comes roughly a month after Pizza Hut counter-sued the operator, alleging that it wasn’t paying various fees as dictated by its franchise agreement. The two have been embroiled in a legal battle since March when EYM filed a breach of contract lawsuit against the franchisor accusing it of failing to remain competitive, not adapting modern practices and not using new technology. A judge denied a motion for a preliminary injunction in April.
In its June lawsuit, Pizza Hut said EYM is one of its largest franchisees, but is among the worst performing in its system. The operator’s same-store sales declined 10% from 2019 to 2023, compared to Pizza Hut’s systemwide same-store sales growth of 7%. Pizza Hut accused the chain of poor operational performance, falling out of compliance for its development obligations and failing to make payments to the franchisor on a timely basis.
EYM is the latest multi-unit franchisee of a national brand to declare bankruptcy. Arby’s franchisee Miracle Restaurant Group and Popeyes franchisee RRG filed for Chapter 11 bankruptcy protections earlier this year. Last year, a handful of Burger King operators, and franchisees from Wendy’s, Denny’s, Popeyes and McDonald’s filed for bankruptcy.
Franchisees have been particularly hit by rising labor and operational costs and difficulty raising capital to finance the remodels or expansions needed to boost sales.
