After teetering on the edge of bankruptcy, fast-casual restaurant chain Mod Pizza was acquired this week by Los Angeles-based Elite Restaurant Group, the company said.
Prior to the announcement of the deal, a spokesperson for Mod said the pizza chain was “actively working toward strategic alternatives that would avoid a Chapter 11 filing.” .
Founded in Seattle in 2008, Mod Pizza has more than 40 locations in California and 500 across the country. Offering “fully customizable” pizzas, Mod helped popularize the trend toward allowing customers to select toppings and sauces for individual sized pies. It’s not known if the merger will result in the closure of any restaurants.
“Mod is a beloved brand with a strong following,” the chain’s chief executive, Beth Scott, said in a statement. “We’re excited to work with Elite Restaurant Group to strengthen Mod’s future.”
Elite Restaurant Group has purchased other struggling restaurant chains. Their portfolio includes Patxi’s Pizza, Daphne’s California Greek, and Slaters 50/50, a burger chain.
Jim Salera, a restaurant industry analyst at Stephens, said the $20 hourly minimum wage for fast food workers that recently went into effect in California is likely raising salaries across the board, not just for the lowest paid workers. Labor costs for restaurants could go up significantly as the minimum wage increase triggers a chain reaction, he said.
But a dip in customer demand has put pressure on the restaurant industry more than other factors, according to Salera.
“The consumer, especially the lower-end consumer, is facing a lot of headwinds in the economy,” he said. “They need to make decisions on how they allocate their budget and they’re tightening their belt.”
The sale of Mod Pizza comes after two popular restaurant chains — Red Lobster and Rubio’s Coastal Grill — filed for bankruptcy protection, citing decreased business and rising labor costs.
