A popular sandwich chain is losing one of its large franchisees after a financial meltdown. EYM Café, which operated 15 Panera Bread locations in the Houston market, filed for bankruptcy and will shut down all of its restaurants immediately.
The troubles of the company have been piling up for years, with its parent company accusing it of serious problems — from missed royalty payments to flunking food safety checks. So awful was the situation that Panera even sued EYM Café this year, accusing the franchisee of continuing to use its name and logo after their official pact ended.
Millions in debt, almost no assets
According to court filings, EYM Café is worth between $10 million and $50 million but has an asset base of less than $50,000. Furthermore, it supposedly owes the IRS $854,714.05 in unpaid taxes.
Apart from the $10 million “non-competition” judgement, the court has issued a two-year “non-compete” injunction against EYM owner Eduardo Diaz. That would forbid Diaz from owning or even consulting for another sandwich chain that competes with Panera within five miles of a single Panera location.
Part of a broader trend for EYM
This is not the first instance in which a brand of EYM has found itself in financial trouble. Last July of 2024, EYM Pizza, a franchise of Pizza Hut, filed for bankruptcy following a long and troublesome battle with Pizza Hut. That put 77 stores on the market and 60 on the chopping block.
It is also the case with EYM Chicken, which runs KFC outlets. It shut down more than 20 outlets last year. On Tuesday, the collapse of EYM Café exposed that the company’s troubles are affecting various segments of its business.
A troubled period for restaurants nationwide
EYM is not the only restaurant operator to be in trouble. In recent years, many large chains have folded.
Sticky’s, a New York-based chicken fingers restaurant chain, was considering filing for Chapter 7 bankruptcy and closing all of its locations.
Earlier this year, Hooters sought Chapter 11 protection, reporting $370 million in liabilities and outlining plans to sell approximately 151 restaurants.
Red Lobster, TGI Fridays, and BurgerFi have also been dealing with restructuring or closing stores due to financial stress.
Even celebrity-recommended restaurants are not immune to the wave of bankruptcies.
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Why businesses go bankrupt
Bankruptcy is a judicial process that helps businesses resolve debts they can’t pay. Federal courts administer it and may be of several types:
Chapter 11 is most common in businesses. They can reorganize, sell assets, and try to stay in business.
Chapter 7 shuts the business down entirely, selling off all assets to repay creditors.
Chapter 15 is used if a bankruptcy is in over one country, and it allows courts to cooperate.
The EYM Café case holds the implication that it will close completely rather than trying to stay open.
The immediate impact
Houston customers equate to the sudden loss of 15 Panera Bread sstore shutdowns usually involve laying offdowns usually involve laying off workers.
For the entire restaurant industry as a whole, EYM’s failure is another sign that even established names with national name recognition can fall behind if debt mounts up and corporate headquarters relations decline.
The bigger picture
Higher food costs, rising wages, and toughening competition from fast-food chains and supermarkets have weighed heavily on the restaurant business in the recent past. Failing to make payments or meet company expectations from franchisees is easily enough to trigger lawsuits and, as with EYM, bankruptcy.
EYM’s financial troubles in multiple brands demonstrate how quickly difficulties at one set of franchises can cascade. While Panera is losing a major Houston operator, Pizza Hut is observing dozens of locations closing, and KFC locations are disappearing, the company’s issues are far from coming to a halt.
