A FRANCHISEE of a major sandwich chain has filed for bankruptcy and will shut down multiple locations.
The parent company accused it of numerous violations including failing to meet food safety standards and missing royalty payments.
The franchisee has been in a long legal battle with its parent company[/caption]
The main company in May also sued the franchisee for allegedly continuing to use its name and logo even though official franchise agreements had been terminated.
EYM Café, a Panera franchisee that once operated 15 locations in the Houston area, is now being forced to shut down completely.
EYM Café has claimed between $10 million and $50 million in liabilities and less than $50,000 in assets, Restaurant Business reports.
Plus, court documents suggest EYM Café owes $854,714.05 to the IRS.
The court has also imposed a two-year non-compete clause on EYM owner Eduardo Diaz.
This prevents Diaz from advising or owning any competitor within five miles of a Panera location.
FEELING THE HEAT
But that’s not the only EYM brand feeling the heat.
EYM Pizza, a Pizza Hut franchisee, filed for bankruptcy in July 2024 after a long legal battle with the pizza giant.
As a result, 77 of its locations were sold and 60 closed permanently.
Furthermore, EYM Chicken – a KFC franchisee – shut down more than 20 locations last year.
EYM’s woes come as other major restaurants struggle financially.
FINANCIAL WOES
Many have filed for bankruptcy in recent years.
Sticky’s, a popular New York-based chicken fingers chain, is in danger of filing for chapter 7 bankruptcy and closing all its locations.
Hooters filed for chapter 11 bankruptcy earlier this year.
The chain claimed $370 million in debt and agreed to sell off about 151 restaurants as part of restructuring efforts.
Other popular eateries that have faced financial trouble include Red Lobster, TGI Fridays and Burger-Fi.
How does bankruptcy work?
Bankruptcy is a specific legal process that helps companies eliminate debt they can’t repay.
The process allows businesses to start fresh and gain access to new credit.
Supervised by federal courts, bankruptcies allow a company to sell off its assets more easily to pay off creditors, according to Investopedia.
Chapter 11, a common process for companies, is used to restructure a business with the goal of remaining open – even if it means selling off most of the company’s properties.
Chapter 7, on the other hand, sells all of a company’s assets, putting it out of business.
Chapter 15, alternatively, allows for collaboration between American and foreign courts to conduct bankruptcy proceedings with “parties of interest involving more than one country,” per the United States Courts.
And even restaurants that cater to a celebrity clientele aren’t safe.
Planta, a high-end and plant-based restaurant, filed for bankruptcy in May.
Many restaurants blame a perfect storm of calamities including high inflation, changing customer preferences and an uncertain economy.
