A Major Pizza Franchisee Files for Unexpected Bankruptcy

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EYM Pizza, a major franchisee operating 140 Pizza Hut locations across several states, has filed for Chapter 11 bankruptcy protection in Texas. This filing follows a tense legal battle with Pizza Hut over unpaid royalties and underperformance issues.

The saga began when Pizza Hut sought to terminate its franchise agreement with EYM due to missed royalty payments and poor performance. EYM, which operates in Indiana, Illinois, Georgia, Wisconsin, and Texas, responded with its own lawsuit, accusing Pizza Hut of failing to maintain a strong brand identity and losing ground to competitors. However, that lawsuit was dismissed earlier this year.

Founded by Eduardo Diaz in 2008, EYM Group began acquiring Pizza Hut franchises in 2015. Despite some initial success, the company faced mounting challenges by 2021. An $89 million buyout offer fell through when the buyer reduced the purchase price. To make matters worse, EYM struggled with rising food costs, lower margins, and delays in new restaurant projects due to the pandemic.

Pizza Hut’s lawsuit against EYM highlighted significant issues: EYM's sales lagged behind the brand’s average by 1,700 basis points from 2019 to 2023, and over 12% of its restaurants failed inspections in the past year. The franchisee also fell behind on royalty payments starting in 2022.

EYM attempted to find a buyer for its restaurants but claimed Pizza Hut was trying to force a low sale price. By March, the franchisee was already burdened with $23 million in bank debt and had invested $46.6 million in buying and renovating its Pizza Hut locations.

EYM’s bankruptcy is just the latest in a series of restaurant industry struggles, joining other recent bankruptcies like Red Lobster and Tijuana Flats. If you have any thoughts on this story or have experienced similar challenges, feel free to share below.