USA – A financial dispute between multinational pizza chain Pizza Hut and one of its franchise partners, EYM Group has placed at least 127 outlets at risk of closure in the South and Midwest.
EYM Group has put the 127 locations for sale after filing for Chapter 11 bankruptcy protection in July because of mounting debt linked to a financial dispute with the chain.
The franchisee partners have asked National Franchise Sales, an advisory firm, to help find a buyer for the outlets in Georgia, Illinois, South Carolina, and Wisconsin.
The franchisee also closed 15 outlets in late June before filing for bankruptcy.
EYM Group reportedly owes Pizza Hut US$2.25 million and an additional US$21 million to Manufacturers Bank. The pizza chain is suing the franchisee partner over the unpaid debt.
The franchisee, in turn, blames Pizza Hut for its financial troubles.
EYM Group argues sales have been dampened by Pizza Hut’s inability to modernize its menu or app to keep up with industry trends and rivals like Little Caesar’s and Domino’s.
In a statement, EYM Group said, “In recent years, the best Pizza Hut managed to do is change the cheese in its stuffed crust from mozzarella to cheddar or trot out an occasional, ill-fated appetizer liked the Philly steak melt.”
The franchisee argues these failed strategies have caused Pizza Hut to lose customers and not attract new ones.
EYM Group also argues its financial troubles were further exacerbated in recent months due to increased cost pressures from high inflation that increased the prices of ingredients. These compounded issues, the chain adds, have significantly eroded profit margins.
High inflation has also made it relatively difficult for the franchise partner to access capital because of higher interest rates.
The pizza chain’s sales in the US have declined 6% in the first half of 2024 compared to last year.
The dispute started when Pizza Hut threatened to close down EYM Group-run restaurants if payment deadlines were not met.
The Indiana deadline elapsed on June 12, the 15 restaurants were closed two days later.
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