Pizza Hut Korea has filed for bankruptcy after being ordered to pay billions of won in damages following a lawsuit by its franchise owners. This marks a significant decline for the pizza chain in South Korea.
On November 4, the company applied for bankruptcy protection with the Seoul Bankruptcy Court, citing operational difficulties caused by account freezes imposed by some franchise owners.
On November 5, the court’s 12th Division of Rehabilitation, led by Judge Oh Byung-hee, issued both a preservation order and a comprehensive stay order. These measures prevent the company from selling assets to pay certain creditors and protect its core assets from being seized by creditors through forced execution or auction.
Additionally, Pizza Hut Korea applied for the Autonomous Restructuring Support (ARS) program. The court stated that the company sought the program to reach a settlement regarding forced execution issues arising from recent litigation.
The bankruptcy filing follows a ruling by the Seoul High Court in September, which ordered Pizza Hut Korea to return 21 billion won in differential franchise fees collected from 94 franchise owners between 2016 and 2022. The company appealed the ruling to the Supreme Court on September 23.
Pizza Hut Korea explained that the bankruptcy filing was necessary due to the freezing of its corporate accounts by some franchise owners involved in the lawsuit. “Since October 4, some franchise owners have imposed seizure and collection measures on our corporate bank accounts, causing temporary difficulties in paying employee salaries, supplier payments, and securing essential ingredients,” the company said.
Despite the financial challenges, all Pizza Hut locations remain open, and the company reassured customers that service would continue. “We will do our utmost to prevent any disadvantages to our franchise owners and consumers,” it stated.
The bankruptcy filing comes as Pizza Hut Korea faces growing financial troubles. The company has posted losses for two consecutive years, with operating losses increasing dramatically from 256.12 million won in 2022 to 4.52 billion won in 2023. Annual revenue fell to 86.9 billion won last year, a 25% decline from 2019 levels. The chain’s presence has also shrunk, with the number of franchise locations dropping by over 40 stores, leaving 297 outlets at the end of 2023.
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