By Daily Mail (U.S.) | Created at 2024-09-26 02:09:58 | Updated at 2024-09-30 23:46:34
4 days ago
Some 127 Pizza Hut restaurants across five states in the South and Midwest are at risk of closing for good.
The franchisee who runs them has put them up for sale after filing for bankruptcy in July due to mounting debts..
It is all linked to a major financial bust-up between Pizza Hut's parent company and franchisee EYM Group.
Some 15 Pizza Hut locations that EYM ran in Indiana and Ohio were abruptly shuttered at the end of June as a result of the dispute. They remain closed.
EYM has now asked advisory firm National Franchise Sales to help find a buyer for a further 127 across Illinois, Georgia, South Carolina and Wisconsin are on the brink of shutting as part of the dispute.
Pizza Hut shut 15 restaurants abruptly in July. Another 127 are at risk
EYM - founded by former McDonald’s Mexico president Eduardo Diaz - filed for Chapter 11 bankruptcy protection in July.
It owes Pizza Hut $2.25 million, and another $21 million to Manufacturers Bank.
EYM is being sued by the chain in relation to millions of dollars of unpaid bills.
In turn, EYM has blamed Pizza Hut for its financial problems.
It says its sales have been badly hit by the pizza chain not modernizing its menus or app to keep up with rivals like Domino's and Little Caesar's.
Overall, Pizza Hut's US restaurants have seen sales slip 6 percent this year compared to last.
Pizza Hut had set EYM staggered deadlines for payment in each state. The chain had warned it would close down the restaurants in each if the debts are not paid.
The deadline for Indiana was June 12. The 15 restaurants were shuttered two days later.
They were in Cedar Lake, Chesterton, Crown Point, Griffith, Hammond, Hobart, LaPorte, Lowell, Merrillville, Michigan City, Munster, Portage, Schererville, Valparaiso and Winfield.
EYM, a Texas-based franchisee, was founded in 2008. Problems between it and Pizza Hut - which has 6,700 locations across the US - date back to last year. It has been operating Pizza Hut restaurants since 2015.
As part of the dispute, EYM sued Pizza Hut too. That case has now been thrown out but court papers claimed that Pizza Hut had 'not kept up with the heavy competition from its competitors, [such as] Dominos, Little Caesars.'
'In recent years, the best Pizza Hut managed to do is change the cheese in its stuffed crust from mozzarella to cheddar or trot out an occasional, ill-fated appetizer liked the Philly steak melt,' EYM added.
These 'failed strategies' caused Pizza Hut to lose customers and not attract new ones.
On top of this, ERM then suffered when the rising cost of ingredients eroded profit margins.
Pizza Hut, owned by Yum Brands Inc., operates through several franchisees nationwide.
Across America, restaurants have increasingly been struggling this year. Faced with higher costs, they have put up menu prices - but that has led to a fall in customers.
Another pizza chain with 512 locations across 28 US states hit money problems this year.
But it emerged in July that Mod Pizza had been saved from bankruptcy at the 11th hour.
Pizza Hut has also been sued by franchisee ERM, which says the chain's menus had gone stale
There had been two weeks of speculation that the chain, 512 locations across 28 US states, would file for Chapter 11 bankruptcy.
Big name chains like Applebee's, TGI Fridays and Boston Market have have all recently shuttered restaurants.
Red Lobster filed for bankruptcy in May and shuttered almost 100 restaurants. It has now emerged from bankruptcy.
BurgerFi is the latest for file for bankruptcy in September - sparking sparks fears of mass closures of its 162 locations.
Chains have been worst hit in California where the minimum wage for fast food restaurants jumped to $20-an-hour from April 1.
In early June, Mexican chain Rubio's shut 48 locations in the state and also filed for bankruptcy.
Across America, mom-and-pop operations have also been shutting.
For example, Fargo's Pit BBQ in Texas closed after more than two decades of serving brisket, ribs and other barbecue classics.
