The restaurant industry struggled when the Covid pandemic brought food establishments across the country to a standstill, with many businesses forced to close their dining rooms and temporarily shift their business model to delivery and takeout.
Some restaurants were unable to make that transition, and many that couldn't make the shift did not reopen after the pandemic abated.
Related: Struggling discount furniture chain plans to file for Chapter 11 bankruptcy
The pandemic is often blamed for much of the distress restaurants are still experiencing. Many of these businesses have been forced to file for Chapter 11 bankruptcy to reorganize and restructure their debts, while others have had to take drastic measures, such as filing for Chapter 7 bankruptcy to close and liquidate their assets.
One of the most prominent restaurants to file for bankruptcy this year was Red Lobster, which filed for Chapter 11 protection on May 19 and closed 93 locations nationwide. The debtor said in court documents that 228 of the chain's restaurants were unprofitable under their current leasing situations, which could lead to the closure of another 135 restaurants.
The company said in court documents that one reason for its financial difficulty was an $11 million loss resulting from its “Ultimate Endless Shrimp” promotion.
Related: Retail brand with 29,000 locations files for Chapter 11 bankruptcy
The fast-casual pizza segment of the restaurant industry was also devastated by the Covid pandemic. The parent company of iconic pizza and arcade chain Chuck E. Cheese, CEC Entertainment, filed for Chapter 11 protection in June 2020, blaming the pandemic and the strain of keeping its restaurants closed.
Chuck E. Cheese had 555 restaurants when it filed for bankruptcy and has since shrunk to about 470 locations as of January 2024, according to Scrapehero.com.
California Pizza Kitchen filed for bankruptcy in July 2020, as part of a pre-negotiated reorganization with its creditors. The company’s CEO, Jim Hyatt, blamed the pandemic for the company’s financial difficulties in court documents. The fast-casual chain currently has about 124 locations, according to Scrapehero. It had more than 250 units when it filed for bankruptcy.
More bankruptcy stories:
- A clothing brand in crisis files for Chapter 11 bankruptcy
- Popular retailer closes all stores after Chapter 11 bankruptcy
- A struggling shipping company files for Chapter 7 bankruptcy to liquidate
Another victim of the Covid pandemic was pizza chain Cici's, which filed for Chapter 11 bankruptcy in January 2021 with the goal of selling it 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-food pizza chain Mod Pizza is preparing to file for Chapter 11 bankruptcy as early as the second week of July, sources with knowledge of the matter told Bloomberg. Talks about filing for bankruptcy are not yet final and the company’s plans could change, the sources said.
The Seattle-based pizza chain, which operates more than 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 pay for fast-food workers from $16 to $20 on April 1.
Mod Pizza also closed 22 other locations across the country, including restaurants in New Jersey, Texas and Wisconsin, the New York Post reported. The company did not disclose the reasons for the closures.
The pizza chain, founded by Scott and Amy Svenson in 2008, started a trend of custom-made pizzas that led to the establishment of similar pizza chains with the launch of Pieology in 2011 and Blaze in 2012.
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