The pizza restaurant sector has struggled with severe economic problems over the last year that led several dining chains to file for bankruptcy to reorganize their businesses.
Fierce competition, increased food and labor costs driven by inflation, high interest rates on debt, and lingering effects from the Covid pandemic are often blamed for the financial distress pizza chains have faced in recent years.
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Consumers have faced sticker shock on pizza prices lately, as average menu prices increased by 27.2% from February 2020 to June 2024, according to the National Restaurant Association. Among the reasons for the menu increases has been rising food costs, which have risen by an average of 29%, and labor costs that have risen by 31% from 2019 to 2024.
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The economic issues caused financial distress, which led several pizza chains and franchises to file for Chapter 11 in 2024.
Pizza Hut franchisee EYM Pizza L.P., which at one time operated 142 Pizza Hut locations in Georgia, Illinois, Indiana, South Carolina, and Wisconsin, filed for Chapter 11 bankruptcy protection in July 2024.
The franchisee sold 77 of its restaurants in Georgia, Illinois, South Carolina, and Wisconsin at a bankruptcy auction for about $11.78 million and said it will end up closing another 50 locations that it was not able to sell.
Tampa Bay Marco’s Pizza franchisees Terry Burkholder and Ben Finley, who owned 19 locations, filed for Chapter 11 bankruptcy in November 2024 to reorganize and sell four underperforming restaurants.
Domino’s franchisee closes hundreds of locations
Huge global chain Domino’s Pizza will be closing several locations in the next few months, as its largest franchisee Domino’s Pizza Enterprises in February said that it will shut down 205 low-performing locations, which will include 172 units in Japan, “to sharpen market focus and improve profitability.”
The franchisee, however, has not revealed any plans to file for bankruptcy.
Domino’s Pizza Enterprises said that it will conduct location closings from April 2025 to June 2025. The restaurant franchisee expects to save about $9.72 million annually with a one-time cost of $60.8 million.
The reduction of locations in Japan will generate a $6.28 million to $7.53 million annual EBITDA increase and a one-time restructuring cost of $38.79 million, the franchisee said.
Domino’s Pizza Enterprises owns the master franchise rights to the restaurant brand in 12 countries, including Australia, Belgium, Cambodia, France, Germany, Japan, Luxembourg, Malaysia, The Netherlands, New Zealand, Singapore, and Taiwan.
Domino’s Pizza Enterprises decided to close locations after conducting an operational and financial review to improve profitability, strengthen franchise partnerships, position the business for long-term growth, and improve shareholder returns.
Domino’s franchisee reorganizes in bankruptcy
Another Domino’s Pizza franchisee, People First Pizza Inc., however, filed for Chapter 11 bankruptcy protection to reorganize its business, facing over $500,000 in disputed claims. The franchisee plans to continue operating the restaurant.
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The Yorba Linda, Calif.-based Domino’s franchise operator filed its Subchapter V Chapter 11 petition on March 26 in the U.S. Bankruptcy Court for the Central District of California, listing $100,000 to $500,000 in assets and $500,000 to $1 million in debts.
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Franchisee People First Pizza’s largest creditors include Philip Soto, seeking a disputed $350,000 claim from a Private Attorneys General Act lawsuit; Libertas Closing Department, with a disputed $150,000 claim from a merchant cash advance; and Black Crow Capital, with a disputed claim of over $115,000 from a revenue purchase agreement, according to the petition.
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