Cici's Holdings Inc., which operates and franchises the Cici's Pizza buffet chain, has filed for Chapter 11 bankruptcy protection after suffering heavy losses due to the ongoing coronavirus pandemic.
While the pandemic has boosted sales for pizza delivery companies Domino's Pizza, Papa John's, and Pizza Hut, buffet-style restaurants like Cici's have lost more than half of their business in the past year.
The 318-unit Cici's pizza chain agreed to sell itself to its biggest lender - D&G Investors - as part of a pre-packaged and expedited bankruptcy process. D&G acquired $81.6 million in debt from CiCi's previous lenders and will convert its secured debt into equity in CiCi's and provide another $9 million in debtor-in-possession financing to help the company through the bankruptcy reorganization.
The buffet-style pizza chain operates franchised locations in the Chattanooga region in Hixson, East Brainerd, Fort Oglethorpe, Cleveland, Tennessee and Dalton, Georgia. The area CiCi's restaurants, which are owned by three different franchisees, remain open.
In its filings in the U.S. Bankruptcy Court for the Northern District of Texas, Cici's said the company owned 12 Cici's Pizza locations and franchised approximately 306 others to 128 franchises in 26 states. In 2010, it had more than 650 restaurants.
The closings by Cici's are among more than 110,000 eating and drinking places in the United States that closed for business temporarily, or for good, during 2020, according to a new report by the National Restaurant Association.
The industry group said Tuesday that restaurant and food-service industry sales fell by $240 billion from an expected $899 billion last year and the industry finished 2020 with nearly 2.5 million fewer jobs than a year earlier.
CiCi's had sought to adapt to the pandemic by shifting more to digital ordering and delivery to replace its buffet model. But company revenues fell last year by 57% and it adjusted earnings before taxes, depreciation and other adjustments went from a positive $14.2 million in 2019 to a loss of $2.7 million last year.
"CiCi's introduction of digital ordering and delivery services has amplified its ability to reach customers, but the company's reliance on third-party dispatch and delivery platforms has impacted margins and may reduce customer loyalty over the longer term by lowering switching costs," CiCi's Chief Financial Officer Richard Peabody said in a bankruptcy court filing. "As such, and because the in-store experience features less prominently today in the overall customer value proposition, CiCi's must work harder and more creatively to differentiate its offerings from the competition."
Cici's bankruptcy filing comes seven months after another pizza chain, Chuck E. Cheese, filed for bankruptcy last June. But Chuck E. Cheese's parent company CEC Entertainment announced on Dec. 30 that the company completed its financial restructuring and emerged from Chapter 11 protection.
Tom Bené, president and CEO of the National Restaurant Association, said restaurants continue to adapt to survive amid the changing landscape for eateries due to restrictions imposed by the virus.
"As we approach the one-year mark of pandemic-related dining restrictions, we know that virtually every restaurant in every community has been impacted," he said. "The year ahead will be critical as we continue to advocate for much-needed recovery funds to help get our industry back on track."