Pizza Hut Franchisee Files for Chapter 11 After Closing 15 Locations

A Pizza Hut franchisee with over 140 stores in the Midwest and South has filed for Chapter 11 bankruptcy protection after closing 15 of its restaurants.

Franchisee EYM Pizza L.P. and related businesses filed for bankruptcy in the Eastern District of Texas on July 22, according to Nation’s Restaurant News. The outlet confirms that the bankruptcy case names two creditors and cites connected businesses in Wisconsin and Indiana. It stated that the franchisee owes Pizza Hut just under $2.25 million and Manufacturers Bank more than $21 million.

In June, Pizza Hut sued EYM Group for mismanagement and late royalties payments, despite the fact that a forbearance period that was allowed earlier in the year had ended in February. This action is the result of an earlier legal dispute that began when EYM sued Pizza Hut on several grounds, including breach of contract. Restaurant Business reported that the lawsuit was dropped by a judge in April, allowing Pizza Hut to file a countersuit.

Eduardo Diaz, a former president of McDonald’s Mexico, established EYM in 2008. After operating Pizza Hut restaurants since 2015, the business recently shut down over 15 locations across Northwest Indiana, according to The Times of Northwest Indiana.

Regarding the closures, a Pizza Hut spokesperson said, “While some local franchisee-operated restaurants have temporarily closed, Pizza Hut remains committed to providing outstanding service and products to our valued customers. The company is working to transition these locations and expects many of them will reopen soon.”

However, employees from the closed locations posted on social media to say they were “let go and told to file for unemployment.” They explained that the “closures affected all Indiana locations owned by EYM Group.”

EYM filed its lawsuit in March and asserted that the franchise is at a competitive disadvantage, especially when compared to competitors like Little Caesars and Domino’s, as a result of the company’s failure to update its menu and digital ordering system. Pizza Hut countersued, citing financial irregularities inside EYM Group and asserting that the franchisee had broken their franchise agreement by neglecting to make the mandatory payments.

These closures’ effects are part of a larger pattern for Pizza Hut. The parent company, Yum Brands, revealed in May that the chain’s same-store sales had decreased by 7% in the most recent quarter. In contrast to the 7% gain in same-store sales recorded during the same period last year, this fall is striking. Pizza Hut’s same-store sales decreased by 6% in the United States alone.