A large Pizza Hut franchisee that has traded lawsuits with its franchisor and closed 15 restaurants has filed for bankruptcy in Texas.
EYM Pizza, which operates 140 locations in Indiana, Illinois, Georgia, Wisconsin and Texas, filed for Chapter 11 debt protection in a handful of filings in Texas on Monday.
That move was likely inevitable, after Pizza Hut sued EYM, seeking to terminate its franchise agreement over underperformance and not paying its royalties on time.
EYM tried avoiding that fate with its own lawsuit accusing Pizza Hut of underperformance of its own, saying that the company has “no image or identity that sticks with patrons” and that it lost ground to rivals in recent years. A judge dismissed that lawsuit in April, however.
Eduardo Diaz, a former president of McDonald’s Mexico, started EYM Group 2008 and in 2015 started buying up Pizza Huts in several deals in various states. Diaz served on various committees for the brand over those years.
But by 2021, the company started looking for a buyer and had an $89 million offer that ultimately collapsed after the buyer lowered its proposed purchase price.
The franchisee then struggled with higher food costs and lower margins as well as new restaurant projects that were delayed due to COVID. The cost of those projects increased, too.
Pizza Hut in its lawsuit against EYM said that the franchisee’s sales underperformed the brand by 1,700 basis points between 2019 and 2023 and that more than 12% of its restaurants failed inspection between 2023 and 2024. In 2022 the operator started falling behind on royalty payments.
EYM has tried and failed to find a buyer over the past couple of years but has accused Pizza Hut of trying to force the operator to accept a low price for some of its restaurants.
EYM as of March had bank debt of $23 million and over the years has spent $46.6 million to buy and renovate its Pizza Hut restaurants.
The bankruptcy filing of EYM is the latest in a string of restaurant company bankruptcies including Red Lobster, Tijuana Flats, Rubio’s and the owner of Tender Greens.
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