After less than two months, Cicis Pizza has emerged from bankruptcy, equipped with a reorganization plan that “strengthened the corporate team, company operations and financial structure.”
The brand—which operates just under 300 stores—is now owned by D&G Investors, a new company jointly owned by SSCP Management and Gala Capital Partners. The transaction was part of a pre-packaged and expedited bankruptcy process. The move came after D&G acquired $81.6 million in debt from Cicis previous lenders.
The firm converted 100 percent of its secured debt into equity in Cicis and provided $9 million in debtor-in-possession financing to help the company through bankruptcy. The sale includes Cicis Enterprises, JMC Restaurant Distribution, and all of its assets and subsidiaries.
“We are looking forward to partnering with D&G Investors going forward and ensuring the brand is poised for an extremely bright future,” said Jeff Hetsel, president and COO of Cicis, in a statement. “For more than 35 years, Cicis has held a special place in the hearts, minds and appetites of many Americans and our focus is to ensure our guests keep that connection to our brand for many years to come.”
Similar to other buffet chains nationwide, Cicis' model took a huge blow once the pandemic hit despite efforts to pursue off-premises, reposition marketing strategies, and optimize cost structures. Even before COVID, the chain was suffering from the growth of fast casuals and the third-party delivery market.
Cicis was in the middle of a turnaround strategy when COVID hit in March 2020. The instability caused CiCis to default under its credit agreement. In 2019, the brand earned $177.3 million in revenue and $14.2 million in adjusted EBITDA. However, in 2020, revenue declined to $76.3 million and adjusted EBITDA lowered to a negative $2.7 million.
As the chain negotiated with lenders, D&G stepped in and acquired all of the debt. Cicis then engaged D&G about a transaction. After a stalemate over costs, the two sides reached an agreement that contemplated a swift bankruptcy process.
The formation of D&G was spearheaded by Anand Gala, founder and managing partner of Gala Capital, and Chris, Sunil, and Puja Dharod, principals of SSCP Management. Cicis said D&G is “infusing operational knowhow and investment capital to sustain near and long-term business objectives.”
“Cicis has so many attributes that are appealing and we believe in a bright future in this post-pandemic world,” said Chris Dharod in a statement. “While the pandemic has been a difficult time for many restaurant brands, not just Cicis, the brand does have staying power because of the strength of the brand and the business model. We are committed to advancing the company and working closely with franchisees to grow their businesses together.”
D&G’s acquisition marks the fourth time Cicis has exchanged hands in less than 20 years. Cicis was purchased in a management buyout by Levine Leichtman Capital Partners in 2003, which then sold the pizza chain to ONCAP Management Partners in 2007. Under ONCAP, CiCis grew to roughly 650 stores in 33 states by 2009. Seven years later, CiCis was purchased by Arlon Food and Agriculture Partners. By then, the footprint had declined to 430 stores.
At the beginning of 2020, Cicis was down to 395 units. As of bankruptcy, the total slid to 318, including 307 franchises. The footprint is now below the 300 mark.
Cicis expects D&G to fix that decline, because of the company’s “proven ability to scale concepts and refine unit-level economics through operational and supply chain efficiencies.”
“Chris, Sunil and I are franchisee-focused leaders that share very similar principles in how we nurture and grow franchise systems. We are geared towards nurturing the success of our franchisees on a local level,” Gala said in a statement. “At the same time, we see an enormous opportunity to use the proven business model Cicis has and expand on it to grow the franchise system into its potential.”