Oath Pizza, which jumped into the fast-casual pizza fray a decade ago but collapsed amid sales and profit challenges and a legal dispute between investors and its would-be buyer, quietly filed for Chapter 7 bankruptcy late last month.
But the filing, which will liquidate what little is left of the company’s assets, is largely a formality at this point. The company abruptly shut down all corporate locations a year ago and all that’s left is a handful of franchisees who bought into the brand after it started franchising.
Next Level Pizza, the parent company of Oath Pizza, declared assets worth between $100,000 and $500,000 and liabilities between $10 million and $50 million. It's not certain how many locations remain open, but all but four of the traditional locations listed on the company's website appear to be closed. Some university locations also remain.
Oath Pizza was founded in 2015 and quickly raised more than $30 million in growth cash from investors eager to jump on the fast-casual pizza bandwagon.
Such chains used a Chipotle-like assembly-line model to create pizzas in front of customers. But the company, like many of its cohorts in the sector, soon struggled with financial losses. Before the pandemic, it brought in a former Chipotle executive, Drew Kellogg, to lead turnaround efforts.
In 2021, Oath Pizza began a franchising push, believing more franchisees were key to its growth. At the time, it operated eight company stores and 22 non-traditional and franchised locations.
That same year, however, the company brought in some additional investors, including James Alpi, who invested $250,000 into the company, and William Wrightson, who invested $350,000.
Both investments included provisions converting them into debt, at more than double the investment value, in case of a change in control.
In 2022, according to court filings, Kellogg told the company’s board that it was insolvent. The board adopted a plan to dissolve the assets, repay creditors and liquidate the company. All the directors resigned.
Kellogg was to oversee those efforts, but by early last year he declared himself the winning bidder in an auction, ignoring all other bids—including one that was apparently worth more than $1 million, according to court filings.
Those filings said Kellogg transferred the assets of Oath Pizza to a new company he owned, called New Oath Pizza. The liabilities were left with the old company, and Kellogg did not pay anything to buy the assets. As CEO he was paid $400,000 per year and in 2022 he paid himself a $100,000 bonus, according to court documents.
That move prompted a lawsuit from Alpi and Wrightson, who were named directors after shareholders were informed of the sale process. “All of a sudden, in the middle of the process, Kellogg owned the business,” Alpi said in an interview. “Nobody could understand how he owns the business.”
By November of last year, Oath Pizza had closed its corporate stores and let go of its employees. The franchisee-owned stores were left. The lawsuit was settled earlier this year, leaving only the Chapter 7 bankruptcy filing remaining.
A Chapter 7 filing results in the liquidation of all the assets, though the only assets remaining are the brand name and the potential royalty stream. It’s possible, if not likely, that someone could step in and buy the brand name and the rights to the franchise.
Nevertheless, it joins a long string of restaurant chains that have filed for bankruptcy this year amid a difficult sales environment. Many fast-casual chains, many of which grew too fast, and a number of casual-dining brands that were overleveraged and lost sales, have sought debt protection this year.
Many others—including the fast-casual pizza brand MOD Pizza—avoided bankruptcy by selling to investors at low prices. Several other fast-casual pizza chains have had problems of their own, including Pizza Rev, Pie Five and others.
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