Financing

Gatti’s Pizza, Gigi’s Cupcakes file for bankruptcy protection

The company cites a heavy debt load and legal liabilities and is closing “several” locations.
Photograph: Shutterstock

The owner of Gatti’s Pizza and Gigi’s Cupcakes filed for bankruptcy protection late last week, citing a heavy debt load and legal liabilities that led to too many financial losses.

The casual-dining pizza chain and cupcake concept are owned by Sovrano LLC, which filed for Chapter 11 debt protection in federal bankruptcy court in Dallas on Friday. The company has more than $32 million in secured debt through several loans, according to a filing—which says it has closed “several” locations recently.

Gatti’s Pizza dates to 1969, when James Eure opened Mr. Gatti’s Pizza in Austin, Texas, which ultimately evolved into a buffet concept.

Sovrano acquired the chain from Blue Sage Capital in 2015. The company operates three restaurants, and franchisees operate another 73.

Gigi’s was founded in 2008 and acquired by a Sovrano affiliate in 2016, when the chain had 92 locations.

A court filing said that the companies “failed to maximize revenues due in part to underperforming stores at several locations.” It said that the company did not close unprofitable stores and instead operated those locations at a loss.

The filing also cited “litigation and other legacy liabilities inherited from the Gigi’s acquisition” that hurt the company’s revenues.

Sovrano failed to get new financing for its business, resulting in a “liquidity crisis” that forced the company to file for bankruptcy protection.

The company said it has recently closed “several” unprofitable stores and expects to turn around operations, restructure finances and emerge from Chapter 11 “quickly.”

KeyCorp acquired Gigi’s for $6 million in 2016, when the chain operated 92 stores. KeyCorp quickly sued the sellers, including Gigi’s Holdings LLC, in federal court in Dallas, citing “misrepresentations” in the sale process. The lawsuit was later terminated.

The company was also embroiled in a dispute with franchisees over raised prices for ingredients and other issues last year.

The filing joins a string of restaurant bankruptcy filings in recent months. Aggressive lending, coupled with weak industry sales and rising costs for labor and rent, have led to several industry filings over the past year. 

Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.

Multimedia

Exclusive Content

Financing

Wendy's faces more upheaval that it doesn't deserve

The Bottom Line: The fast-food chain early last year decided to replace a successful CEO with a restaurant industry outsider. That outsider has now left, leaving the company with more uncertainty.

Technology

Olo's restaurant tech odyssey will continue in private

Tech Check: After a rocky few years on the public markets, the online ordering giant will continue its quest for “hospitality at scale” under a new owner.

Financing

All restaurants are pricey in California, not just fast food

The Bottom Line: The state’s fast-food wage hasn’t driven up prices at limited-service restaurants, at least compared with full-service chains. That doesn’t mean it’s not expensive there.

Trending

More from our partners