One of the nation's most popular pizzeria chains filed for bankruptcy Thursday, blaming the coronavirus pandemic for its financial struggles. California Pizza Kitchen said it will continue operating as usual while working through a Chapter 11 restructuring plan aimed at reducing its debt by $230 million.
The pizzeria hinted in its filing that it will close some of its 200-plus locations, though it expects to exit bankruptcy in less than three months. CEO Jim Hyatt said in a statement that declaring bankruptcy now will create "a stronger future for California Pizza Kitchen."
"The unprecedented impact of COVID-19 on our operations certainly created additional challenges," Hyatt said.
Like many restaurant chains, CPK temporarily closed stores hoping to curb the spread of COVID-19. The company permanently closed 46 locations that couldn't be converted to take-out facilities. The closures especially hurt CPK, Hyatt said in court documents, because 78% of total sales prior to the pandemic came from in-store dining.
CPK has spent the past few months lowering costs by slashing corporate pay by 35%, renegotiating leases with landlords and postponing store renovations. The company has about 15,000 employees and about 6,000 of them were furloughed in April and May. Court documents show that CPK hasn't paid rent at its locations in the past four months.
Under its proposed restructuring plan, CPK would reduce its current debt of $403 million to about $174 million, with rolling payments due until the end of 2024. The company announced $47 million in new financing Thursday that will help keep stores open. CPK has $13.5 million in cash on hand, Hyatt said in court documents.
CPK joins a list of restaurants that have declared bankruptcy during the pandemic.for Chapter 11 in June, while grab-and-go food chain PQ New York in May.
Indeed, the pandemic has triggered a wave of bankruptcies, and experts expect more in coming months. There were more than 3,600 Chapter 11 filings through June 30 — a 26% jump from the year-ago period, according to data from Epiq Global.
Online restaurant reservation service OpenTable predicted 1 in 4 restaurants won't survive the pandemic.
"For many restaurants, the COVID-19 pandemic will be the greatest challenge they will ever face," Hyatt said. "For some, it may also be their last."