California Pizza Kitchen Files Chapter 11 Bankruptcy
The dominoes are continuing to fall as more and more household name businesses file bankruptcy due to the coronavirus pandemic. The latest of these is California Pizza Kitchen, a chain that specializes in- you guessed it- pizza. Unlike pizza delivery chains like Pizza Hut, Domino’s, and Papa John’s, California Pizza Kitchen specializes in fusion pizza flavors like Thai Chicken and California Veggie. The company also sells frozen pizzas in almost every major supermarket.
Chapter 11 Bankruptcy Protection in Arizona
Chapter 11 Bankruptcy can be used both by businesses that are seeking to shut down permanently and by those that need to restructure their debts to return to profitability. Chapter 11 is also available to individuals seeking to file a personal bankruptcy. Unlike Chapter 7, where debts are liquidated, or Chapter 13, where debts are reorganized and at least partially repaid, Chapter 11 restructures debts. This could mean transferring debts into ownership shares, selling the business, selling only portions of the business, and more. Both the company that filed and its creditors can suggest plans for the company to emerge from bankruptcy. If the proposal comes from the company, the creditor panel must approve it before the bankruptcy can proceed.
When a company is in an active Chapter 11 bankruptcy, it cedes final authority over important business matters. The company’s top creditors will form a panel that does have this authority. Examples of the types of matters the panel would have control over include entering new leases and other contracts, opening and closing store locations, selling off company equipment, and starting franchise operations.
California Pizza Kitchen’s other likely option was Chapter 7. Popular with personal bankruptcy filers because it discharges debt without repayment, businesses can also use this chapter of bankruptcy. However, because debts are simply wiped clean, California Pizza Kitchen would be required to close all of its locations. Many of its restaurants are in leased spaces, but it would be required to surrender all freezers, ovens, and other business equipment that could be valuable.
California Pizza Kitchen’s Chapter 11 Bankruptcy Plan
Despite the company’s name, California Pizza Kitchen filed its bankruptcy petition in the Southern district of Texas. California Pizza Kitchen currently has more than 200 locations across eight countries. The company’s CEO, Jim Hyatt, released a statement on July 30, 2020 that while some restaurant locations have already closed due to lease expiration and COVID-19 difficulties, no additional locations would be closing as part of the bankruptcy process. That means customers can continue to dine in, order takeout or delivery, and use gift cards and rewards points. Sometimes, customers will lose the value of those rewards programs when a company files bankruptcy.
Despite the popularity of the chain’s frozen pizzas, 80% of California Pizza Kitchen’s revenue comes from in person dining. These sales have decreased 40% as a result of the coronavirus. The company has already secured $46.8 million in financing and plans to emerge from bankruptcy in 3 months or less. The company has $13 million cash in the bank presently, but is months behind on rent at many of its locations.
Coronavirus Bankruptcy Trends
So far, many of the major businesses that have filed bankruptcy are mainstays at shopping malls. These include J. Crew, JC Penney, Neiman Marcus, True Religion, Lucky Brand, Ann Taylor, and more. While it doesn’t sell clothing, California Pizza Kitchen is commonly found at shopping centers.
Fashion retail has been one of the hardest hit industries because many stores have been forced to close entirely for the past few months. Restaurants are also struggling, but most states’ stay at home orders have allowed for restaurants to remain open for take out and delivery orders. Surprisingly, considering the popularity of pizza for take out and delivery, many of the main restaurants to file Chapter 11 during the pandemic have served pizza. Sweet Tomatoes, a buffet-style restaurant with pizza options, will never reopen due to how difficult it will be to comply with COVID-19 guidelines. Chuck E. Cheese has filed Chapter 11, despite efforts to appeal to more mature customers by operating under the name “Pasqually’s Pizza & Wings” on delivery apps. NPC International, which operates 1,200 Pizza Hut franchise locations, has also declared bankruptcy.
Chapter 7 and Chapter 11 Bankruptcy Attorneys Can Assist
If you own a business in Arizona and are feeling the impact of 2020 and the COVID-19 Pandemic. Call us and get a free consultation and debt evaluation. Find out if a Chapter 7 or Chapter 11 Bankruptcy is what is right for your business. We offer FREE Consultations, Payment Plans for every budget and even a $0 Down bankruptcy option. Our Arizona Bankruptcy Lawyers are ready to help you and your business.