Having a well-known brand name does not make you immune to the recent upheaval in the restaurant business.
The Covid pandemic caused a number of changes to how Americans eat and, even with the days of lockdowns, social distancing, and closed dining rooms over, some companies have not recovered. First, the flow of people has changed as many companies have either not made workers return to their offices or have gone to a hybrid schedule.
Related: Struggling restaurant chain hits Chapter 11 bankruptcy problem
That has made some restaurant locations no longer viable as they simply don't have enough potential customers. Shifting populations have also hit certain residential areas as people moved from cities to suburbs and from cold weather climates to warmer ones.
In addition, the Covid pandemic largely benefited chains that had previously invested in technology. Companies including McDonald's, Starbucks, and Domino's had the infrastructure in place to pivot to delivery and takeout, while Burger King, Popeye's, and Pizza Hut were not as prepared.
That contributed to multiple Burger King and Popeye's franchisees filing for Chapter 11 bankruptcy protection, representing hundreds of stores. Now, a major Pizza Hut franchisee has filed for Chapter 11 bankruptcy protection after falling behind in payments to the Yum Brands (YUM) company.
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Image source: Chen Jianli/Xinhua via Getty
Pizza Hut operator files Chapter 11 bankruptcy
EYM Pizza, which operates roughly 140 Pizza Hut locations in Texas, Wisconsin, Ohio, and Indiana, filed for Chapter 11 bankruptcy protection in the Eastern District of Texas on July 22.
EYM Pizza had previously been sued by Pizza Hut after it stopped paying royalties when a forbearance period with its parent company ended. The company's bankruptcy filing shows that it has under $50,000 in assets and claims between $500,000 and $1 million in liabilities.
EYM's creditors include the IRS, to which it owes nearly $400,000, and Pizza Hut itself to which it owes just over $274,000. The company also owes just under $25,000 to Doordash and reports smaller debts to a number of other vendors, landlords. and partners.
"EYM, which was founded by former McDonald’s Mexico president Eduardo Diaz in 2008, has been operating Pizza Hut restaurants since 2015, but recently closed more than 15 locations in Ohio and Indiana," Nation's Restaurant News reported.
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Pizza Hut has struggled
Pizza Hut's problems are not limited to EYM. Yum Brands CEO David Gibbs talked about the chain's performance during his company's first-quarter earnings call.
"During the first quarter, system sales declined 4% with 5% unit growth and a 7% decline in same-store sales. The year-over-year growth rate in same-store sales was suppressed from difficult year-ago laps and the ongoing impact from the conflict in the Middle East," he said.
Same-store sales were actually slightly better in the company's home market.
"At Pizza Hut U.S., same-store sales declined 6% as we lapped the launch of Melts and Big New Yorker Pizza," he said.
Gibbs believes that the company's new artificial intelligence (AI) platform will help it reverse these trends.
More bankruptcy:
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"This system allows us to leverage insights into consumer behavior across our brands in the U.S. After full deployment, R.E.D. 360 will be the first scaled cross-brand U.S. restaurant consumer data engine in the quick service industry and will pave the way for unique insights and personalization opportunities on digital and social channels," he said.
Related: Another popular beverage brand files Chapter 11 bankruptcy
Yum Brands has also leaned on technology to improve its restaurant operations.
"Our custom-built Super App, which provides smart, automated routine management tools for our restaurant managers, is now used in nearly 9,500 Pizza Hut and KFC restaurants with significant expansion plans underway for KFC," CFO Chris Turner shared during the call.
