Pizza Chains Face Bankruptcy Amid Rising Costs and Competition

UpTrajectory Review

The pizza business is cracking under the same pressures hitting every restaurant, but faster. TheStreet reports that Papa John's will close 300 underperforming restaurants and cut 7% of its workforce, Pizza Hut's owner Yum! Brands will shutter 250 locations under its Hut Forward plan, and major Domino's franchisees have closed or filed Chapter 11. Now Smoking Monkey Pizza, a small wood-fired chain in Renton, Wash., has joined the bankruptcy docket, with its parent TB Enterprises listing up to $50,000 in assets against $100,000 to $500,000 in liabilities. The common thread: brutal competition, rising labor and food costs, and leases signed in a cheaper era.

If you run a restaurant or any storefront business, this is your warning shot. The chains closing hundreds of units are not failing because customers stopped eating pizza; they are failing because their unit economics no longer work. Labor costs have climbed, ingredient costs have climbed, and rent has stayed sticky. When a franchisee like North County Pizza or a small operator like Smoking Monkey files Chapter 11, the culprit is usually the lease. Bankruptcy lets a restaurant reject unprofitable leases and renegotiate the rest, something no landlord will offer voluntarily while you are still paying on time.

What stands out here is the scale of the closures relative to the sector's health. Pizza was supposed to be pandemic-proof: cheap, delivery-friendly, and family-sized. Yet Domino's largest franchisee is shrinking, Papa John's is retreating, and even wood-fired independents are drowning. The under-reported story is how much of this pain traces back to 2020-era expansion. Chains and franchisees signed leases and built units when demand spiked and labor was cheap. That demand normalized, wages jumped, and the debt and rent stayed. The correction is not over; 200 Papa John's closures are still scheduled through 2026.

The fallout will not hit everyone equally. Franchisees absorb the losses while franchisors collect royalties on surviving stores, so expect more franchisee bankruptcies even as the parent brands report stable same-store sales. Landlords will lose tenants and may finally negotiate, but only after a bankruptcy judge forces the issue. Workers lose jobs with little notice. Customers in smaller markets lose their only affordable family-dining option. Suppliers get squeezed when chains close units mid-contract. If you lease commercial space, watch your local pizza row: those vacancies will depress nearby rents, which is an opening if your lease is coming due.

Watch for two things next. First, more Chapter 11 filings from regional franchisees and small chains through 2026, especially those with 2020-vintage leases. Second, whether the big brands use this shakeout to buy back stores cheaply or convert them to ghost kitchens. If you operate a restaurant, audit your lease now, not when you are missing payments. If you are a tenant negotiating a renewal, use the closures as leverage. Landlords would rather cut rent than lose another anchor tenant to the bankruptcy court.

“Restaurants often need to file bankruptcy to resolve issues with leases that might be unmanageable.” — TheStreet

Takeaway: Audit your lease and labor math now; bankruptcy courts are doing what landlords will not, and the pizza shakeout is not finished.