Iowa-based Happy Joe’s Pizza & Ice Cream has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court in Delaware – not-so-happy news for two of its company-owned restaurants , which then closed. Franchise locations were not part of the September 2 filing and will not be affected.
Rising food and labor costs, recession fears and outdated restaurant models were blamed for the move.
Tom Sacco, CEO of parent company Dynamic Restaurant Holdings, which acquired majority stakes in Happy Joe’s and Tony Sacco’s in 2017, has filed a plan to reorganize the two brands’ company restaurants. (Tom Sacco and Tony Sacco are not related.)
“We believe this restructuring will help us strengthen the entire system. By closing underperforming locations, largely due to exorbitant leases, we now have the ability to build a stronger brand,” Sacco said.
While two Happy Joe’s restaurants closed — they hadn’t been renovated in nearly two decades — five other company-owned establishments are expected to remain open, according to Sacco.
Happy Joe’s has signed more franchise contracts and opened more new locations in the past 18 months than at any time in the past decade, Sacco noted, adding that the vast majority of Happy Joe’s 38 franchises are “very profitable” and have been recently renovated. , or are in the process of doing so.
Average gross sales in 2021 for large franchised restaurants were $1.2 million for the top quartile and $446,785 for the bottom quartile, according to Happy Joe’s franchise backgrounder.
“This restructuring was the right thing to do for the long-term health of the Happy Joe’s brand,” Sacco said. “We simply couldn’t continue to deplete our strong franchise revenue stream to cover losses from our company stores, some of which are underperforming due to exorbitant rents and rapidly rising operating costs.”
Sacco became CEO of Happy Joe’s in October 2020 and has been tasked with modernizing the 50-year-old Midwestern brand, including restructuring and refreshing the business model for future success. Sacco previously led the image refresh and revitalization at Ponderosa Steakhouse & Buffet and Bonanza Family Restaurants. Sacco also helped lead the national expansion of Red Robin Gourmet Burgers, BJ’s Restaurant & Brewhouse and Ghirardelli Chocolate & Ice Cream Shoppes.
On September 13, Happy Joe’s announced that its newest franchisees, Travis and Heather Potts, had signed an agreement to bring the brand to their hometown of St. Louis, Missouri, with a restaurant slated to open in the first quarter of 2023. The brand plans to continue to expand in Missouri, Sacco said, and enter new markets in Florida, Texas and Arizona.
Last year the brand opened two franchise stores and signed a master franchise agreement with HJ Happy Joe’s for Restaurants, run by Ahmed Elbatran, to open at least 25 new restaurants across the Middle East and North Africa , with the potential to operate between 50 and 75 Happy Joe’s throughout the region.
Happy Joe’s recorded $38 million in systemwide sales in 2021, down 2.6% from 2020.