Dive Brief:
- EYM Pizza will sell 127 Pizza Hut locations in Illinois, Indiana, Georgia, South Carolina and Wisconsin as part of a restructuring plan, according to a press release.
- The operator engaged National Franchise Sales to manage the sale of these units. NFS will identify qualified buyers and facilitate the sales of the stores “to maximize recovery for creditors and provide a path forward for the restaurants involved,” NFS said in a statement.
- EYM filed for Chapter 11 bankruptcy protection in July, listing Manufacturers Bank and Pizza Hut as its top unsecured creditors with claims of over $21 million and $2.2 million, respectively.
Dive Insight:
EYM was once one of Pizza Hut’s largest franchisees, with around 140 units. But with this sale and previous closures, it appears the operator will exit Pizza Hut’s system entirely. In June, EYM Pizza shuttered about a dozen locations in Indiana; Pizza Hut said it would transition those stores to new owners and expected them to reopen. EYM Chicken, a sister company to EYM Pizza, closed 25 KFC restaurants in the Midwest earlier this year, as well.
EYM entered a legal battle with Pizza Hut in March when it sued the franchisor over breach of contract. The operator accused Pizza Hut of failing to remain competitive and not adapting to modern practices and using new technology. Pizza Hut countersued and claimed that EYM was one of its poorest performing franchisees, posting declines in same-store sales during a time when the rest of its system reported same-store sales growth.
This marks the second time in recent years that a large Pizza Hut operator has sold all or most of its locations during bankruptcy proceedings. In 2020, NPC International, Pizza Hut’s largest operator at the time, went bankrupt and sold all of its 925 units to Flynn Group in 2021.
Other fast food franchisees have declared bankruptcy this year, including operators from Subway, Arby’s and Popeyes. Cost pressures and a decline in traffic are making it more difficult for operators to stay on top of their debt. Arby’s franchisee Miracle Restaurant Group, for example, said negative same-stores sales, inflationary pressures and an inability to sell underperforming locations were part of the reasons it filed for bankruptcy protections.
