EYM Pizza LP, a franchisee with over 130 successful restaurants, filed for Chapter 11 bankruptcy protection in the Eastern District of Texas this week due to significant financial disputes with Pizza Hut's parent company.
(Source: WFAA)
The listed creditors in the document include Manufacturers Bank and Yum Brands. The files show that EYM Pizza owes the bank more than $20 million and owes Yum Brands $2.2 million. EYM Pizza did not list estimated assets or liabilities in the initial documents.
As one of Yum's largest franchisees, EYM filed for Chapter 11 bankruptcy protection, following litigation between franchisor and franchisee.
According to Restaurant Dive, EYM operates about 140 Pizza Hut stores in Wisconsin, Illinois, Indiana, Georgia, and South Carolina. The company filed a breach of contract lawsuit in March, accusing Pizza Hut of failing to stay competitive and violating its fiduciary duties, which was later dismissed.
Pizza Hut, a Yum Brands subsidiary based in Plano, sued EYM for failing to pay royalties on time, and despite EYM being given a grace period until 2023, the case was settled in February.
In a countersuit filed in June, Pizza Hut claims that EYM, as one of its largest franchisees, performed the worst. Restaurant Dive reports that Pizza Hut is working to transfer ownership of EYM's stores to different owners.
The pizza giant, based in Plano, is currently facing challenges posed by rising labor and food costs, and the coronavirus outbreak, which caused a heavy blow to the US dining industry.
EYM's bankruptcy filing is the latest since the outbreak of the pandemic, but not the largest.
NPC International Inc., based in Overland Park, Kansas, was once the largest Pizza Hut franchise operator in the United States. The company filed for Chapter 11 protection in the Southern District of Texas in June 2020, when it operated more than 1,200 Pizza Hut stores.
In January 2021, a bankruptcy judge approved the sale of NPC's Pizza Hut and Wendy's restaurants for about $800 million.
Restaurant Business Magazine reported that Pizza Hut has about 6,500 stores in the US, down from about 7,300 in 2019.
Nation's Restaurant News notes that since April, Red Lobster, Louisiana Arby's franchisee Miracle Restaurant Group, and San Antonio Subway franchisee River Sub have all filed for protection.
This essentially means that the disputes are continuing, and franchisees are now trying to restructure their debts to avoid paying some of their debts. Time will tell whether more than 130 Pizza Hut stores can survive all of this.