One of the nation’s most popular pizza chains filed for bankruptcy Thursday, blaming the coronavirus pandemic for its financial struggles. California Pizza Kitchen said it will continue to operate as usual while working through a Chapter 11 restructuring plan aimed at reducing its debt by $ 230 million.
The pizzeria hinted in its presentation that it will close some of its more than 200 locations, although it hopes to emerge from bankruptcy in less than three months. CEO Jim Hyatt said in a statement that filing for bankruptcy now will create “a stronger future for California Pizza Kitchen.”
“The unprecedented impact of COVID-19 on our operations certainly created additional challenges,” said Hyatt.
Like many restaurant chains, CPK temporarily closed stores in hopes of curbing the spread of COVID-19. The company permanently closed 46 locations that could not be converted to takeout facilities. The closings especially hurt CPK, Hyatt said in court documents, because 78% of total sales before the pandemic came from in-store restaurants.
CPK has spent the past few months cutting costs by reducing corporate pay by 35%, renegotiating leases with owners, and postponing store renovations. The company has around 15,000 employees and around 6,000 of them were laid off in April and May. Court documents show that CPK has not paid rent at its locations in the past four months.
Under the proposed restructuring plan, CPK would reduce its current debt from $ 403 million to about $ 174 million, with payments continuing through the end of 2024. The company announced Thursday $ 47 million in new funds that will help keep stores open. CPK has $ 13.5 million in cash, Hyatt said in court documents.
CPK joins a list of restaurants that have filed for bankruptcy during the pandemic. Chuck E. Cheese archived for Chapter 11 in June, while the PQ New York takeaway chain submitted for Chapter 11 In May.
In fact, the pandemic has sparked a wave of bankruptcies, and experts expect more in the coming months. There were more than 3,600 Chapter 11 filings through June 30, an increase of 26% over the same period last year, according to Epiq Global data.
The online restaurant reservation service OpenTable predicted that 1 in 4 restaurants will not survive the pandemic.
“For many restaurants, the COVID-19 pandemic will be the biggest challenge they will face,” said Hyatt. “For some, it may also be the last.”
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