A filing shows that a huge pizza franchisee suddenly filed for bankruptcy after a nasty lawsuit with its franchisor.
Pizza Hut and EYM Pizza have been suing each other over the franchisor’s attempts to close the stores for not paying fees. EYM Pizza has now filed for Chapter 11 bankruptcy in the great state of Texas.
EYM Pizza has 140 sites in Texas, Indiana, Illinois, Georgia, and Wisconsin. On Monday, a few of its locations in Texas filed for Chapter 11 debt protection.
That move was probably going to happen anyway since Pizza Hut sued EYM to end its franchise deal because it wasn’t doing its job and wasn’t paying its royalties on time, as reported by Restaurant Business.
As a way to escape that, EYM filed its lawsuit against Pizza Hut, saying that the company has “no image or identity that sticks with patrons” and has lost ground to competitors in recent years. In April, though, a judge threw out that case.
Eduardo Diaz, who used to be president of McDonald’s Mexico, started EYM Group in 2008. In 2015, he began buying Pizza Huts in several deals in different states. During those years, Diaz worked for the brand in several groups.
But by 2021, the business had started looking for a buyer. It had an offer of $89 million, but it fell through when the buyer dropped its price.
That was hard for the owner because food prices went up, profits went down, and COVID-19 caused new restaurant projects to be held up. The costs of those projects also went up.
When Pizza Hut sued EYM, it said that between 2019 and 2023, the franchisee’s sales fell 1,700 basis points short of the brand’s, and between 2023 and 2024, more than 12% of its restaurants failed inspections.
The company started to miss payments on royalties in 2022.
Over the past few years, EYM has tried to sell its stores but has not been able to. It has also accused Pizza Hut of trying to get the operator to agree to a low price.
Restaurant Business says that EYM has spent $46.6 million over the years to buy and fix up its Pizza Hut stores. As of March, the company owed $23 million to banks.
EYM is the latest food company to file for bankruptcy. Red Lobster, Tijuana Flats, Rubio’s, and the owner of Tender Greens are the others.