There apparently weren’t enough pieces of the market-share pie to go around for Papa Gino’s.
The chain’s parent company filed for Chapter 11 bankruptcy in Delaware on Monday after abruptly closing 47 of its namesake pizzerias and 45 D’Angelo sandwich shops and laying off 1,100 people.
The culprits? Dedham-based Papa Gino’s, aka PGHC Holdings, blamed rising labor costs and competition from the national players expanding in its core New England market. Newer rivals include the likes of Blaze, Anthony’s Coal Fired Pizza, Firehouse Subs, and Jimmy John’s.
Dining habits have also shifted, and Papa Gino’s has found itself struggling as more consumers opt for takeout or deliveries over eating at its relatively large restaurants.
“It became a grab-and-go or a delivery spot,” said Bob Luz, president of the Massachusetts Restaurant Association. “You could walk into a Papa Gino’s restaurant, didn’t matter when, [and] you could roll a bowling ball through the middle of it and you were not going to hurt anybody.”
Debt also played a big role, as it often does in bankruptcies. Private equity firm Bunker Hill Capital had owned Papa Gino’s since 2005, but recently shifted control of the company to Papa Gino’s management and the company’s largest creditor, another investment firm, Wynnchurch Capital, after the debt piled up. Wynnchurch has submitted a bid worth $20 million to acquire PGHC in bankruptcy, but other potential buyers could try to top that bid.
At least two other pizzeria companies — Uno Restaurants and Upper Crust — were already courting displaced employees. RJ Dourney, Upper Crust’s chief executive, said his team is trying to track down terminated Papa Gino’s workers by phone and social media. If Upper Crust doesn’t have the right opening at its eight locations, Dourney said it will reach out to other restaurant groups.
“We’ve been spending the last 24 hours trying to reach out to employees who lost their jobs,” Dourney said.
Louie Psallidas, the chief executive at Uno in West Roxbury, said Papa Gino’s faces marketplace shifts, such as the “premium-ization” of pizza, a trend that has prompted Uno to offer an increasing variety of toppings on its pies. At the same time, there’s competition on the other end of the spectrum from convenience store chains.
“Now, for 99 cents, you can get a slice at 7-Eleven,” Psallidas said.
After the closures, Papa Gino’s employs about 3,000 people, most of them part-timers. The pizza chain includes 97 corporate-owned locations, and three licensed spots; D’Angelo, meanwhile, now has 44 corporate stores, and 34 owned by franchisees or licensees.
The company says the bankruptcy process and sale will enable it to remodel and modernize its restaurants, enhance its online ordering capabilities, and open new locations in the region.
Papa Gino’s officials said they tried to find a buyer before turning to bankruptcy, by hiring an investment bank to shop the company for much of the past two years. But only three potential offers emerged, all for less than the company’s debt obligations, which now total more than $100 million.
Competitors have been eating away at the company’s market share for years. Papa Gino’s Holdings Corp. had 370 locations when Bunker Hill acquired the group in 2005. Other pizza chains have also struggled. Most notably, Northborough-based Bertucci’s filed for bankruptcy earlier this year, and was later acquired by Orlando-based Earl Enterprises for $20 million.
The rise of third-party delivery companies, such as GrubHub and DoorDash, have also been a game-changer for pizza sellers that relied heavily on door-to-door delivery.
“Pizza and Chinese were once the biggest delivery products for most American consumers,” said Darren Tristano, a restaurant consultant in Chicago. “Now, they can get a burger, they can get a salad. They can get whatever they want [delivered to their homes].”