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More than 140 Pizza Hut restaurants at risk as franchise owner files for bankruptcy
More than 140 Pizza Hut restaurants are at risk after the franchisee who runs them filed for bankruptcy.
It is all linked to a major financial bust-up between the pizza giant's parent company and EYM Group, which operates the 142 locations across five states in the South and the Midwest.
EYM - founded by former McDonald’s Mexico president Eduardo Diaz - filed for Chapter 11 bankruptcy protection in the Eastern District of Texas on Monday. It owes Pizza Hut $2.25 million, and another $21 million to Manufacturers Bank.
Some 15 Pizza Hut locations that EYM runs in Indiana and Ohio were abruptly shuttered at the end of June.
Now 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 on Friday night
EYM is being sued by the chain in relation to millions of dollars of unpaid bills.
Meanwhile, 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.
Staff at Pizza Huts in Indiana posted on social media that they were given no warning ahead of the closures. They said they had been told to file for unemployment.
A Pizza Hut spokesperson said: 'The company is working to transition these locations and expects many of them will reopen soon.'
Pizza Hut had set EYM staggered deadlines for payment in each state. The chain had warned it 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.
Pizza Hut has also been sued by franchisee ERM, which says the chain's menus had gone stale
On top of this, ERM then suffered when the cost of ingredients were badly hit by inflation which 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.
Bigger chains like Applebee's, TGI Fridays and Boston Market have have all recently shuttered restaurants, as have smaller chains like BurgerFi.
Red Lobster filed for bankruptcy in May and also shuttered almost 100 restaurants.
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.
Earlier this month, for example, Fargo's Pit BBQ in Texas closed after more than two decades of serving brisket, ribs and other barbecue classics.