Pizza Hut 140+ Unit Franchisee EYM Files for Bankruptcy

The pizza industry is booming, with the market projected to reach $42.2 million by 2025. Industry giant Pizza Hut, one of the world's largest pizza chains, offers a lucrative franchise opportunity with over 19,000 locations in more than 100 countries. However, for one big time multi-unit franchisee, the investment has led to bankruptcy.

One of Pizza Hut’s largest franchisees, EYM Pizza LP, filed for Chapter 11 bankruptcy protection on July 22, 2024, in the Eastern District of Texas. EYM, which is based in Irving, Texas, was founded in 2008 by McDonald’s Mexico former president Eduardo Diaz and operates over 140 Pizza Hut locations across Wisconsin, Illinois, Indiana, Georgia and South Carolina. EYM listed significant debts in its bankruptcy filing, including over $20 million to Manufacturers Bank and $2.2 million to Pizza Hut.

The closures have affected local employment, with workers being told to file for unemployment. Pizza Hut has stated plans to transition these locations, anticipating many will reopen soon.

This bankruptcy follows a series of legal disputes between EYM and Pizza Hut. Earlier this year, EYM sued Pizza Hut for breach of contract, accusing the franchisor of failing to stay competitive, but the case was dismissed. Subsequently, Pizza Hut countersued EYM for late royalty payments and store underperformance, claiming EYM is one of its worst-performing franchisees.

These legal battles, coupled with the financial strain from the pandemic and rising operational costs, have culminated in EYM’s bankruptcy. This scenario is part of a broader trend, as other large franchisees, like NPC International, have also filed for bankruptcy since the pandemic.

The legal disputes between EYM and Pizza Hut underscore deeper operational and financial challenges. These issues reflect broader struggles within the chain, with Yum! Brands reporting a 7% decline in Pizza Hut’s same-store sales in the most recent quarter, a sharp contrast to the 7% increase seen the previous year.