Home | Gossip | Pizza Inn Soap Opera

Pizza Inn Soap Opera

pizza inn franchisePizza Inn is ~400-unit buffet, delivery, carryout, sometimes-drive thru pizza chain in the soutwestern United States with a drama filled past few years that would make some soap opera’s jealous.

In 2002, the then-CEO Rogers of Pizza Inn borrowed about $2 million from the company to buy company stock. The stock sank and Rogers couldn’t pay back the company’s cash loan. Rogers was fired as CEO and Pizza Inn wrote off the debt and moved Parker, then President, to CEO.

Shortly thereafter, ex-CEO Rogers sold his 27% stake in Pizza Inn to a private investment firm escaping with a tidy profit. With the private investment firm holding a controlling interest, the current executives sought to protect their jobs by writing employment agreements with Pizza Inn. The employment agreements provide that if the four executives left for “good reason” or were removed from their posts, they would receive payouts totaling $7.4 million (Parker would have pocketed $5.4 million, Olgreen $630,000, Clark $605,000 and Preator $597,000), more than twice Pizza Inn’s 2003 profit of $3.1 million, which would have surely bankrupted the company.

Eventually the private investment firm got their wish and the shareholders elected new candidates to the board of directors. Parker, the CEO with the parachute employment agreement, resigned and claimed this trigger the parachute and the company owed $5.4 million (he sold 98,000 shares a few days before). He eventually won a settlement of $2.8 million. Pizza Inn even sued its former legal counsel for its role in advising the company on the huge severance packages (the lawyers were supposed to work for the best interest of the company, not the executives). In the meantime, revenues of the franchisor fell due to lower franchisee sales which resulted in the franchisor suffering less royalties and less revenue from the franchisor-owned supplier. Pizza Inn also settles an unrelated law suit with PepsiCo for breach of contract and agreed to pay to PepsiCo $410,000. Drama!!

(links to many articles on the subject at Pizza Marketplace)

So, with all these distractions supposedly behind the mind the executive team, will Pizza Inn salvage the business and work on a profitable model? The pizza is above average, usually gathering positive reviews on Citysearch and other local city guides. The franchisee association (I would have loved to have been a fly on the wall at those meetings during over the past 5 years) claims it is pleased with the new direction of the company and looks forward to the more collaborative style of management. Pizza Inn recently sold it’s headquarters to pay off debts and is outsourcing distribution services previously operate by a company-owned division. Pizza Inn will probably turn the corner and further improve operations. The lower food costs will certainly help franchisees and hopefully dampen the store closings.

Would I buy it? While I like the quick buffet style restaurant rather than the small-box take-out/delivery, with even Papa John’s recently looking to convert to small eat-in areas, I’d be more inclined to buy the stock than buy a franchise during turnaround when cash is tight.

About Ryan Knoll

Attorney and advisor with an interest in franchising. Feel free to email me comments and questions on the "Contact Us" page.

2 comments

  1. How do these people get hired in the first place? I’m sure people that greedy and unethical would have shown those tendencies earlier in their career.

  2. reflections of the food industry at times in general – but there is hope. At least the pizza is good, haha.

Leave a Reply

Your email address will not be published. Required fields are marked *