Major Bankrupt Pizza Hut Franchisee Sells All Remaining Restaurants | Franchise news

EYM Pizza, the Pizza Hut franchisee that filed for bankruptcy this summer amid a dispute with the franchisor, is selling its remaining restaurants in five states.

The sale of EYM Pizza's 127 stores is part of a financial restructuring of the company, which is part of multi-brand operator EYM Group. The EYM Group, led by President Eduardo Diaz, is also a franchisee of KFC, Denny's and Panera Bread. His pizza business works with M&A advisory and brokerage firm National Franchise Sales to identify buyers and facilitate the sale of restaurants in Illinois, Indiana, Georgia, South Carolina and Wisconsin.

Alan Gallup, senior adviser to the NFS Asset Recovery team, noted that EYM Pizza may lose some “undesirable locations” through the bankruptcy process and he expects to see “very reasonable interest” in the remaining units.

“Given the issues between the franchisee and the franchisor, the business was a little shaken over the summer in terms of sales,” Gallup said, adding “negative press” related to the back-and-forth lawsuits and the bankruptcy that resulted from some disruptions at branch level. However, Pizza Hut is “in an attractive segment,” he continued, and the 127 units available will attract qualified buyers.

“We think we're going to get a lot of interest and there's money to be made from these restaurants,” Gallup said.

Pizza Hut sued EYM Pizza in June for allegedly failing to pay royalties on time and what the chain described as inadequate store performance. The lawsuit came after EYM sued Pizza Hut in March to stop the franchisor from terminating its franchise agreements, but a judge dismissed the lawsuit in April. At that time, EYM Pizza had more than 140 units.

Pizza Hut reported a 7 percent increase in same-store sales from 2019 to 2023, while EYM's same-store sales fell 10 percent during that period. EYM allegedly fails to pay its fees on time and performs “among the worst” of all major Pizza Hut franchisees, according to the lawsuit.

According to court documents, in 2016, EYM bought stores in Illinois for $10.8 million and stores in Indiana for $8.6 million to get into the Pizza Hut scheme. In 2017, EYM purchased its markets in Georgia and South Carolina for $9 million. The group purchased some stores from a franchisee in Wisconsin for $6.8 million and 16 company-owned stores for $1.5 million in 2018. EYM criticized Pizza Hut in its first lawsuit for failing to keep up with modern times and technology.

Gallup and NFS are currently gathering information for potential buyers to evaluate as part of the due diligence process and expect to release marketing materials early next week. A deadline of October 30 has been set for stalking horse bidders.

Among the 127 Pizza Huts up for sale are 15 units in Indiana that closed this summer after franchise agreements were terminated, Gallup said. These stores are being offered with the possibility of reopening as Pizza Huts or the assets could be converted to another use.

EYM Chicken, a sister company of EYM Pizza, closed more than two dozen of its KFC restaurants in cities in Illinois, Indiana and Wisconsin in August.