California Pizza Kitchen files for bankruptcy after closing stores during the pandemic

• California Pizza Kitchen filed for Chapter 11 bankruptcy on Thursday.
• The coronavirus pandemic sent sales plummeting at the sit-down-centric pizza chain, with same-store sales dropping by 77% in late March.
• "Prior to the filing, CPK closed some restaurants in the United States ... We do not have plans to close any additional restaurants at this time," said CPK CEO Jim Hyatt.

California Pizza Kitchen has filed for bankruptcy, as the chain grapples with how to compete in the COVID era.

The pizza chain filed for Chapter 11 bankruptcy on Thursday, saying in a filing that sales plummeted amid the coronavirus pandemic. There are 179 CPK locations in the US, as well as 36 international locations.

Prior to the pandemic, sit-down dining made up 78% of the company's sales. As a result, weekly net sales in the last week of March were just $2.5 million, down 77% from the same period in 2019.

The pizza chain has attempted to rebuild sales by doubling down on take out and delivery, as well as selling groceries via CPK Market. While CPK said sales had recovered, they were still more than 40% lower in late June than they were in the same period the prior year.

"The restructuring agreement includes a commitment for $46.8 million in new financing which will enable ongoing operation of CPK restaurants," CPK CEO Jim Hyatt said in a statement on Thursday. "This proactive filing will allow us the ability to reduce our long term debt load and emerge as a much stronger company."

Hyatt emphasized that restaurants will remain open for business throughout the restructuring. CPK hopes to complete the Chapter 11 restructuring process in less than three months.

"Prior to the filing, CPK closed some restaurants in the United States due to the impact of the COVID-19 pandemic and lease related challenges with our landlords," Hyatt said. "We do not have plans to close any additional restaurants at this time."

In the bankruptcy filing, CPK said that it temporarily closed 46 locations in early March that were not feasible to remain open as take-out and delivery-only businesses. CPK has been working with landlords to renegotiate leases and has so far been granted $6.1 million in concessions over the next three years. CPK has generally not paid rent since the pandemic, according to the filing.

While the coronavirus created massive problems for CPK, the company said in the filing that some struggles predated the pandemic.

The rise of fast-casual chains such as Chipotle, Blaze Pizza, and Panera cut into CPK's business, especially around lunch, with their speedier and less expensive options. The rise of delivery resulted in new competitors. And, according to the filing, people's willingness to stay home and watch Netflix or shop on Amazon meant that fewer people were eating at restaurants within malls.

"The Company now has to draw people out of the comfort of their homes and has lost a number of customers who would otherwise have dined at a CPK on impulse while out for other purposes," the filing reads.