By Ben Coley
Pieology, which declared bankruptcy this month, revealed that an unsuccessful acquisition of franchise stores—combined with years of “severe disruption” from COVID and the volatile macroeconomic environment—pushed it to seek legal protection.
The goal of the bankruptcy is to optimize the footprint, focus on profitable restaurants, stabilize operations and restructure the overall business.
Founder Carl Chang shared the details in court documents. The fast-casual pizza brand currently operates 45 restaurants (16 corporate and 29 franchises). The brand shuttered 17 company-owned units leading up to bankruptcy. In January 2022, Pieology had 130 outlets.
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According to Chang, labor shortages, inflation and shifting consumer behavior weighed heavily on the business, pushing Pieology to invest more in digital channels and in-store pickup efforts. In the first half of 2024, the brand installed new back-of-house equipment for cooking and refrigeration, simplified its menu and pricing structure, streamlined its labor model and refreshed restaurant interiors.
“These steps produced measurable improvements in throughput, customer satisfaction, store-level performance, labor efficiency and food-cost consistency,” Chang said.
While riding this momentum, Pieology decided to purchase 29 underperforming franchise locations, with the hopes of extending its operational improvements to these restaurants. The chain assumed it would receive capital to implement the proper changes (new equipment, image refresh, swallowing short-term operating losses). However, right before the deal closed on April 30, key investors pulled out of the agreement. Pieology moved forward with the transaction anyway out of fear of risking a lawsuit or the franchise eventually collapsing.
After the acquisition closed, the brand searched for other investors, but was ultimately unsuccessful.
“Without the capital infusion required to stabilize the acquired stores, the Debtors’ liquidity rapidly deteriorated,” Chang said. “Operating the expanded portfolio significantly increased cash demands—including payroll, food purchases, lease obligations, and maintenance costs—which the Debtors could not meet with available cash flow.”
Because of the growing financial pressure and insufficient funds to spark a turnaround strategy, Pieology turned to bankruptcy.
Chang founded Pieology in 2011 in Fullerton, California. The restaurateur noted that before COVID, the chain “experienced strong growth and became known in the fast-casual sector for its efficient operations, and an upbeat in-restaurant dining experience.” By 2018, the company began expanding internationally and opened 13 units outside of the U.S. The units didn’t last long; all of these restaurants shuttered shortly after the pandemic.
The chain listed between $100,000 and $500,000 in assets and between $1 million and $10 million in liabilities.
Shawn Thompson served as CEO from January 2022 to November, after previous stops at Tim Hortons and Burger King.
Ben Coley is editor of PMQ Pizza’s sister publication QSR. This story originally appeared here on QSR’s website.
