WFCN –
A filing shows that a large pizza franchisee has unexpectedly filed for bankruptcy after a contentious legal battle with its franchisor.
After a series of disputes involving Pizza Hut’s attempts to close its locations due to unpaid royalties, EYM Pizza has now filed for Chapter 11 bankruptcy protection in Texas.
A small number of files were made in Texas on Monday seeking Chapter 11 debt protection. EYM Pizza has 140 stores across the states of Indiana, Illinois, Georgia, Wisconsin, and Texas.
According to Restaurant Business, Pizza Hut has already taken this step after suing EYM to end the franchise agreement due to underperformance and late fees.
By suing Pizza Hut for underperformance, EYM hoped to sidestep that destiny; the firm allegedly has “no image or identity that sticks with patrons” and has been losing ground to competitors in recent years. But in April, a court threw out that case.
Former McDonald’s Mexico president Eduardo Diaz launched EYM Group in 2008 and began acquiring Pizza Huts in a series of acquisitions across multiple states in 2015. Diaz was an active member of the brand’s committees throughout that time.
Nevertheless, the business began seeking a buyer in 2021 and had a $89 million offer that fell through when the prospective buyer reduced their asking price.
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As a result of COVID, the franchisee had to deal with reduced profits and higher food expenses, and new restaurant developments were postponed. Those projects also saw an increase in cost.
The franchisee’s sales lagged 1,700 basis points behind the brand from 2019 to 2023, and over 12% of its locations failed inspection between 2023 and 2024, according to Pizza Hut’s lawsuit against EYM.
The operator began to experience a decline in royalty payments in 2022.
While EYM has been unsuccessful in its search for a buyer over the last several years, the operator has accused Pizza Hut of attempting to pressure it into accepting an unfairly low price for a number of its locations.
As of March, EYM’s bank debt was $23 million, and according to Restaurant Business, the company has spent $46.6 million on the acquisition and renovation of its Pizza Hut locations throughout the years.
A number of restaurant chains have recently gone bankrupt; EYM follows in the footsteps of Red Lobster, Rubio’s, Tijuana Flats, and the proprietor of Tender Greens.