Popular pizza chains have battled through financial distress over the last five years, dealing with higher labor and food costs caused by rising inflation, a dramatic increase in interest rates that raised the cost of debt, and long-term effects from the Covid-19 pandemic that are still causing problems for restaurant operators.
Restaurants were dealt crippling cost increases from 2019 to 2024, as food costs for the average restaurant increased by 29% and labor costs rose by 31% in the same period, according to the National Restaurant Association.
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To keep up with the average 3% to 5% pre-tax margin on sales, restaurants had no choice but to raise their prices. Average menu prices increased by 27.2% from February 2020 to June 2024, according to the association.
Related: Another major pizza chain franchisee files Chapter 11 bankruptcy
Increased prices, however, can discourage some diners from patronizing restaurants, which can also lead to a decline in revenue.
The combination of distress factors led several pizza chains to close or sell locations in the last year and in some cases file for bankruptcy protection.
Pizza chains unload locations
Marco's Pizza franchise owners Terry Burkholder and Ben Finley in the Tampa Bay area, who owned 19 locations, filed for Chapter 11 bankruptcy in November 2024 to reorganize and sell four underperforming restaurants.
Seattle-based Mod Pizza faced financial distress, closed 27 of its 500 stores, and considered a bankruptcy filing in July 2024 but instead found a buyer as Elite Restaurant Group purchased the chain and continues to operate it.
Bankrupt Pizza Hut franchisee EYM Pizza L.P., which once owned 142 of the chain's franchise locations, sold 77 of its restaurants in Georgia, Illinois, South Carolina, and Wisconsin to six separate bidders in January, including Yum Brands (YUM) franchisor Pizza Hut LLC, at a bankruptcy auction for about $11.78 million.
The franchisee had closed 15 of its locations in Indiana and Ohio in July 2024 before filing for bankruptcy. It will end up closing another 50 locations that it has not been able to sell.
Top Domino's Pizza franchisee closes over 200 locations
And now, giant pizza restaurant operator Domino's Pizza Enterprises, which is the chain's largest franchisee, revealed that it will close 205 low-performing locations "to sharpen market focus and improve profitability, the company said on Feb 7, according to QSR.
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The restaurant closings will commence from April 2025 to June 2025 and reportedly include 172 locations in Japan. The franchisee expects to save about $9.72 million annually with a one-time cost of $60.8 million.
More bankruptcy:
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- Former bankrupt craft beer chain adds locations after closings
The Japan downsizing will generate a $6.28 million to $7.53 million annual EBITDA increase and a one-time restructuring cost of $38.79 million.
Domino's Pizza Enterprises owns the master franchise rights to the pizza chain's brand in 12 global countries, including Australia, Belgium, Cambodia, France, Germany, Japan, Luxembourg, Malaysia, The Netherlands, New Zealand, Singapore, and Taiwan.
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Domino’s Pizza Enterprises conducted an operational and financial review to improve profitability, strengthen franchise partnerships, position the business for long-term growth, and improve shareholder returns, which led to the location closings.
“Japan is an attractive market for quick service restaurants and pizza, with significant long-term upside for Domino’s," the franchisee's Group CEO Mark van Dyck said in a statement. "Some of our COVID-period expansion resulted in stores that simply weren’t optimal based on our current customer proposition and removing them will strengthen our network.”
“We are committed to being disciplined in expansion — prioritising locations in high density [markets] where we can drive incremental, profitable growth. To reach our potential, we are taking decisive action.
"We are also refining our value proposition and improving our pricing strategy to position existing and new stores for sustainable success,” van Dyck said.
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