Pizza Hut Korea filed for court receivership after being ordered to pay billions of won in damages following a lawsuit by franchise owners. (Image courtesy of Kobiz Media)
SEOUL, Nov. 6 (Korea Bizwire) – Pizza Hut Korea filed for court receivership after being ordered to pay billions of won in damages following a lawsuit by franchise owners, marking a significant downturn for the once-prominent pizza chain in South Korea.
The company submitted its application for bankruptcy protection to the Seoul Bankruptcy Court on November 4, citing temporary operational difficulties stemming from account freezes imposed by some franchise owners.
The court’s 12th Division of Rehabilitation, presided over by Judge Oh Byung-hee, issued both a preservation order and a comprehensive stay order on November 5.
These measures prevent the company from disposing of assets to pay specific creditors while also protecting the company’s core assets from seizure by creditors through forced execution, provisional attachment, or auction before the commencement of rehabilitation proceedings.
Pizza Hut Korea also applied for an Autonomous Restructuring Support (ARS) program. According to the court, “Pizza Hut Korea has applied for the ARS program to reach an amicable settlement regarding the forced execution issues resulting from recent litigation.”
The bankruptcy filing follows a September ruling by the Seoul High Court that ordered Pizza Hut Korea to return 21 billion won in differential franchise fees collected from 94 franchise owners between 2016 and 2022. The company appealed this decision to the Supreme Court on September 23.
In a statement, Pizza Hut Korea explained that the bankruptcy filing was necessitated by the freezing of corporate accounts by some franchise owners involved in the lawsuit.
“Since October 4, some franchise owners have imposed seizure and collection measures on our corporate bank accounts, causing temporary difficulties in paying employee salaries, supplier payments, and securing essential ingredients,” the company stated.
The pizza chain emphasized that all locations nationwide remain open for business, assuring customers that service would continue uninterrupted. “We will do our utmost to prevent any disadvantages to our franchise owners and consumers,” the company added.
The filing comes amid mounting financial troubles for Pizza Hut Korea. The company has posted losses for two consecutive years since 2022.
Its operating losses surged more than twentyfold from 256.12 million won in 2022 to 4.52 billion won in 2023. Annual revenue fell below 100 billion won to 86.9 billion won last year, representing a 25% decline from 2019 levels.
The chain’s footprint has also diminished significantly, with the number of franchise locations dropping by more than 40 stores over two years to 297 outlets by the end of last year.
M. H. Lee (mhlee@koreabizwire.com)
