Oath Pizza, which entered the fast-casual pizza market a decade ago, has filed for Chapter 7 bankruptcy. This decision comes after the company faced significant challenges, including declining sales, profit issues, and a legal dispute between investors and a potential buyer. The bankruptcy filing occurred late last month and will lead to the liquidation of the company’s remaining assets.
This filing is mostly a formality since Oath Pizza closed all corporate locations a year ago. Currently, only a few franchisees remain who had bought into the brand after it began franchising.
Next Level Pizza, the parent company of Oath Pizza, reported assets valued between $100,000 and $500,000 and liabilities ranging from $10 million to $50 million. It is unclear how many locations are still operating, but nearly all of the traditional locations listed on the company’s website appear to be closed, with only a few university locations remaining.
Founded in 2015, Oath Pizza quickly attracted over $30 million in investments from those eager to join the fast-casual pizza trend. The company utilized a Chipotle-style assembly line model, allowing customers to see their pizzas being made. However, like many in the industry, Oath Pizza faced financial difficulties. Before the pandemic, it hired former Chipotle executive Drew Kellogg to help with its turnaround efforts.
In 2021, Oath Pizza began pushing for more franchising, believing it was essential for growth. At that time, the company operated eight corporate stores and 22 franchised or non-traditional locations. That year, it also brought in new investors, including James Alpi and William Wrightson, who contributed $250,000 and $350,000, respectively. Their investments included provisions that would convert to debt if there was a change in control.
In 2022, court filings revealed that Kellogg informed the board of the company’s insolvency. The board then agreed to dissolve the assets, pay creditors, and liquidate the company. Following this, all directors resigned.
Kellogg was meant to oversee this process, but by early last year, he declared himself the winning bidder in an auction, ignoring other bids, including one worth over $1 million. Court documents indicate that Kellogg transferred Oath Pizza’s assets to a new company he owned, called New Oath Pizza. The liabilities remained with the original company, and Kellogg did not pay for the assets. As CEO, he earned a salary of $400,000 per year and awarded himself a $100,000 bonus in 2022.
This situation led to a lawsuit from Alpi and Wrightson, who became directors after shareholders were informed of the sale. “Suddenly, in the middle of the process, Kellogg owned the business,” Alpi said. “Nobody could understand how he owned the business.”
By November of last year, Oath Pizza had shut down its corporate stores and laid off employees, leaving only franchise-owned locations. The lawsuit was settled earlier this year, leaving the Chapter 7 bankruptcy filing as the final step.
Under Chapter 7, all remaining assets will be liquidated. Currently, the only assets left are the brand name and any potential royalty streams. It is possible that someone could purchase the brand name and franchise rights.
Oath Pizza’s bankruptcy adds to a growing list of restaurant chains that have filed for bankruptcy this year amid tough sales conditions. Many fast-casual brands expanded too quickly, while several casual dining chains became overleveraged and struggled with sales. Some companies, including MOD Pizza, avoided bankruptcy by selling to investors at reduced prices. Other fast-casual pizza chains, such as Pizza Rev and Pie Five, are also facing challenges.
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