Distressed pizza chain plans to file for Chapter 11 bankruptcy

According to THE STREET, The restaurant industry faced severe challenges during the Covid pandemic, which forced many establishments to close their dining rooms and pivot to delivery and takeout models. While some restaurants managed to adapt, others struggled with this transition and did not survive the pandemic’s economic toll. The pandemic’s aftermath has continued to affect the industry, leading many restaurants to file for Chapter 11 bankruptcy to restructure their debts, or Chapter 7 bankruptcy to liquidate their assets.

Notable Bankruptcy Filings in 2024

One of the most significant bankruptcy filings this year was from Red Lobster. On May 19, 2024, the seafood chain filed for Chapter 11 protection and closed 93 locations across the United States. The company reported that 228 of its restaurants were not profitable under their current lease agreements, potentially leading to the closure of an additional 135 locations. Court documents revealed that Red Lobster experienced an $11 million loss due to its “Ultimate Endless Shrimp” promotion, contributing to its financial woes.

The Fast-Casual Pizza Sector Takes a Hit

The fast-casual pizza segment was also hit hard by the pandemic. Chuck E. Cheese’s parent company, CEC Entertainment, filed for Chapter 11 in June 2020, citing the pandemic and the challenges of maintaining closed restaurants. At the time of its bankruptcy, Chuck E. Cheese had 555 restaurants. By January 2024, the company had reduced its number of locations to around 470.

California Pizza Kitchen, another notable casualty, filed for Chapter 11 in July 2020. The company, which entered a pre-negotiated reorganization with its lenders, attributed its financial difficulties to the pandemic. As of early 2024, California Pizza Kitchen operates approximately 124 locations, down from over 250 at the time of its bankruptcy filing.

Cici’s Pizza, known for its buffet-style dining, also struggled due to the pandemic. In January 2021, the chain filed for Chapter 11, seeking a sale to D&G Investors. At the time, Cici’s had about 318 locations; today, it operates 275 locations, according to the company’s website.

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Mod Pizza Faces Financial Uncertainty

Now, another fast-casual pizza chain, Mod Pizza, is preparing to file for Chapter 11 bankruptcy. Sources told Bloomberg that the Seattle-based chain could file as early as the second week of July. Discussions about the filing are ongoing, and the company’s plans could change. Mod Pizza, which operates over 500 locations in the U.S. and Canada, has already closed 27 restaurants this year, including five in California just before a significant minimum wage increase. Additionally, 22 other locations across the country have been shut down.

Founded in 2008 by Scott and Amy Svenson, Mod Pizza pioneered the made-to-order personal pizza trend, which inspired similar chains like Pieology and Blaze. Despite its initial success, Mod Pizza now faces financial difficulties that could lead it to seek Chapter 11 protection.

As the restaurant industry continues to navigate the post-pandemic economic landscape, many chains are struggling to stay afloat amidst ongoing challenges.