Cici’s Pizza Files For Bankruptcy, Sells To D&G Investors

Cici’s Pizza, the all-you-can-eat pizza buffet chain, declared bankruptcy on Monday (Jan. 25), in large part due to the COVID-19 pandemic’s impacts on consumer behavior. Despite the chain’s attempts to ameliorate the pandemic’s impacts, revenue had decreased from $177.3 million in 2019 to $76.3 million in 2020, reports QSR Magazine, with the shift toward digital and delivery unable to sufficiently offset the loss of dine-in customers.

CFO Richard Peabody explained in the court filing, excerpted in Restaurant Business, that the trend toward delivery “poses significant challenges to Cici’s all-you-can-eat buffet model, which depends on in-store dining for approximately 99% of its revenue.”

Despite the company’s promising attempts to grow its digital ordering and delivery, which had been in effect since before the pandemic, the cost of the switch was too high.

“The Company’s reliance on third party dispatch and delivery platforms has impacted margins and may reduce customer loyalty over the longer term by lowering switching costs,” said Peabody. “As such, and because the in-store experience features less prominently today in the overall customer value proposition, CiCi’s must work harder and more creatively to differentiate its offerings from the competition.”

After weeks of negotiation, the chain has sold itself to D&G Investors, which had previously acquired its $81.6 million of debt. D&G’s debt will be converted into equity, and the firm will provide $9 million in financing to carry the pizza chain through the bankruptcy process, which Cici’s expects will be completed by March.

Many quick-service restaurants (QSRs) are bearing the burden of the economic downturn and the rapid behavioral changes initiated by the pandemic, having trouble making the necessary shift to delivery. According to Tillster research, in the last 12 months, more than 50 percent of QSR customers ordered online for delivery, and over 51 percent would order more often if delivery was offered. When ordering for delivery, 40 percent of customers order mostly from large chains, 40 percent order from large chains and independent restaurants and about 20 percent order mostly from smaller independent restaurants.

While the pandemic has put significant strain on almost all restaurants, successful QSRs have adapted to consumers’ changing needs by putting new technologies into place online and in store to make sure diners can seamlessly and safely make their orders. Some chains have utilized their loyalty programs to personalize the digital experience.

A recent PYMNTS survey shows that the main reason consumers are not using loyalty programs is because they do not exist. The research revealed that 38.7 percent of respondents who are not currently using such offerings cite programs not being offered as the reason. Many consumers also report being drawn to the digital ordering space by promos or other incentives. One recent study found that 80 percent of consumers would be more likely to order online or via mobile apps if eateries rewarded them for doing so. QSRs must adapt to an industry in which diners are seeking restaurants that can provide unique offers and rewards from a safe social distance.