The restaurant industry struggled when the Covid pandemic paralyzed the nation's dining establishments, with many businesses forced to close down their dining rooms and temporarily switch their business model to delivery and takeout.
Some restaurants were not able to make that transition, and many of those that couldn't make the change did not reopen after the pandemic subsided.
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The pandemic is often blamed for a lot of distress that restaurants are still having. Many of these businesses have been forced to file for Chapter 11 bankruptcy to reorganize and restructure their debts, while others needed to take drastic action like filing Chapter 7 bankruptcy to close down and liquidate their assets.
One of the most prominent restaurants to file bankruptcy this year was Red Lobster, which on May 19 filed for Chapter 11 protection and closed 93 locations nationwide. The debtor said in court papers that 228 of the chain's restaurants were not profitable in their current lease situations, which could lead to another 135 restaurant closings.
The company claimed in court filings that one of the reasons for its financial distress was an $11 million loss as a result of its all-you-can-eat "Ultimate Endless Shrimp" promotion.
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The fast-casual pizza segment of the restaurant industry was also devastated by the Covid pandemic. Iconic pizza and arcade chain Chuck E. Cheese's parent company CEC Entertainment filed for Chapter 11 protection in June 2020, blaming the pandemic and the strain from keeping its restaurants closed for its filing.
Chuck E. Cheese had 555 restaurants when it filed for bankruptcy, and it has since downsized to about 470 locations as of January 2024, according to Scrapehero.com.
California Pizza Kitchen filed for Chapter 11 bankruptcy in July 2020 in a pre-negotiated reorganization with its lenders. The company's CEO Jim Hyatt in court papers blamed the pandemic for the company's financial distress. The fast-casual chain currently has about 124 locations, according to Scrapehero. It had over 250 units when it filed for bankruptcy.
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Another victim of the Covid pandemic was pizza buffet chain Cici's, which in January 2021 filed for Chapter 11 bankruptcy seeking a sale to D&G Investors. The company had about 318 locations in 2021 and now has 275, according to Cici's website.
Mod Pizza could be the next chain to file for bankruptcy
And now, popular fast-casual pizza restaurant chain Mod Pizza is preparing to file for Chapter 11 bankruptcy as soon as the second week of July, sources with knowledge of the matter told Bloomberg. Discussions about a bankruptcy filing are not final yet and the company's plans could change, sources said.
The Seattle-based pizza chain, which operates over 500 locations nationwide and in Canada, has closed 27 restaurants this year, including five in California just before the state's minimum wage law raised fast-food workers' pay from $16 to $20 on April 1.
Mod Pizza also shut down 22 other locations across the country that included restaurants in New Jersey, Texas and Wisconsin, New York Post reported. The company did not reveal reasons for the closures.
The pizza chain, which was founded by Scott and Amy Svenson in 2008, started a made-to-order personal pizza craze that led to the establishment of similar pizza chains with Pieology's launch in 2011 and Blaze in 2012.
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