Seattle-based MOD Pizza has shut down 26 locations in 11 states and the District of Columbia in recent weeks, including five in California. But, despite media speculation, the closures had nothing to do with California’s minimum wage hike to $20 an hour, the company told PMQ. It’s a simple matter of underperforming stores.
In an email to PMQ, MOD Pizza CEO Beth Scott confirmed the closures, which include five in California, three in Philadelphia, three in Chicago, three in the Washington, D.C. area, three in the Dallas area, two in Wisconsin, two in Seattle and one each in Florida, Oklahoma, Virginia and Oregon. One franchised restaurant in the Atlanta market closed in March.
“Despite the best efforts of our local managers and squad members, these restaurants had underperformed for some time,” Scott said. “We provided severance to all squad members where transfer opportunities were unavailable or declined.”
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Are more closures on the horizon? “Like any successful business, we continually evaluate the performance of all of our assets,” Scott said. “In a company of our size, not every location is going to be successful over time due to a wide range of factors.”
Various media outlets have speculated that the closings in California were related to that state’s minimum wage increase. But MOD stores were also closed in other states and cities across the country with lower minimum wage requirements. For example, the minimum wage in Oklahoma, Pennsylvania and Wisconsin remains at $7.25 per hour.
Some of the states with closed MOD Pizza locations have modest minimum wage hikes in place for 2024. Florida will raise the floor-level wage from $12 to $13 per hour in September.
Minimum wage hikes aside, MOD Pizza still has 53 stores operating in California, Scott noted. “While rising wages in California and other states certainly were a factor in the underperformance of the five locations we closed, the timing of California’s minimum wage hike taking effect and our closings in the state was coincidental,” she said.
In media interviews, some MOD Pizza employees—collectively called the MOD Squad—said they’d been given short notice about the loss of their jobs, but Scott said that’s par for the course. “For many reasons, including guest and employee safety and security, it is impractical to provide significant advance notice when a restaurant closes,” she said. “We notified squads in the restaurants impacted 1-2 days prior to closing and communicated the timing of final paychecks and severance payments at day-of-closing meetings. Despite our best efforts to clearly communicate this, there was still subsequent confusion among employees about the timing of final paychecks.”
Founded in 2008 by Scott and Ally Svenson, MOD Pizza was the country’s fastest-growing restaurant chain in 2018 and 2019 and moved to No. 3 in 2020. For that year, the brand had 467 stores with sales growth of 26.21% and systemwide sales of $493.1 million. By 2022, MOD was the No. 7 pizza chain in the U.S. in systemwide sales and total number of locations, according to QSR Magazine. With 531 locations, the company logged an estimated $605 million in sales in 2022, outperforming chains like California Pizza Kitchen, Hungry Howie’s and Round Table Pizza.
The Seattle brand has a social mission that includes impact hiring—providing jobs for the formerly incarcerated and individuals with autism and intellectual and physical disabilities—and combating food insecurity in a collaboration with Generosity Feeds. “When we started MOD, we referred to it as a crazy social experiment that would combine the best of a for-profit business with the heart of a nonprofit, whereby the more successful we were, the better and bigger social impact we would make,” Scott Svenson explained in PMQ’s January-February 2021 cover story on MOD Pizza.
Svenson added, “We have a product and an experience that customers have come to know and love, and we’ve had a reason for growing: We believe that the bigger we become, the more people we can employ and the bigger social impact we can make.”
