Oath Pizza declares bankruptcy – QSR Magazine

Oath Pizza, once an up-and-coming fast-food restaurant, declared Chapter 7 bankruptcy in late October.

The filing will liquidate the assets of parent company Next Level Pizza. The company listed between $100,000 and $500,000 in assets and between $10 million and $50 million in liabilities.

Oath Pizza’s website separates street-side restaurants from university units. There appear to be only four curbside locations still open, three of which can be ordered online. It is unclear how many restaurants on college campuses will remain open.

The move comes a few months after the brand settled a lawsuit with former CEO Drew Kellogg over allegations of fraud and breach of fiduciary duty. The case dates back to November 2022, when Kellogg informed the board of directors that the company was insolvent due to ongoing financial problems, unprofitable retail operations and mounting debts exceeding assets. These problems led the board to approve a plan to dissolve the company, sell assets, repay creditors and wind down operations.

Despite this dissolution plan, Kellogg allegedly manipulated the asset sales process for personal gain. Rather than facilitate a fair, competitive bidding process — with at least one interested party willing to pay more than $1 million — Kellogg closed the auction and arranged a deal to sell Next Level Pizza’s assets to New Oath, its own controlled entity, in an amount A check for $10,000 from an insufficient balance account and an unsecured non-recourse note. This self-dealing transaction burdened Next Level Pizza with all liabilities while New Oath and Kellogg acquired assets including subsidiaries and leased store locations, exacerbating its financial problems and leaving the company unable to pay its creditors.

After taking control of the company, Kellogg allegedly fired all employees responsible for sales, marketing, finance and reporting, prioritizing substantial personal compensation and benefits for himself. With many of the stores operating at a loss and Kellogg trying to keep paying himself, he failed to pay numerous vendors and creditors, claiming these financial obligations belonged to Next Level Pizza, according to the lawsuit. He further pursued this scheme by maintaining various accounts, including payroll, under the name Next Level Pizza, even though he claimed New Oath had acquired them. According to the lawsuit, this allowed revenues to flow to New Oath and Kellogg, while costs remained with Next Level Pizza.

Due to vendors and employees going unpaid, all of the company’s stores closed in December 2023. As a result, several landlords and vendors filed claims against Next Level Pizza and its subsidiaries for lease defaults and unpaid bills.

Between January 2023 and August, under New Oath and Kellogg’s control, no employees were hired and no financial records were kept, leaving Next Level Pizza with no documentation of income, expenses or assets. In addition, Oath Franchising LLC, a subsidiary that had franchise agreements with six franchisees, faced challenges as most franchisees stopped paying royalties, citing ownership uncertainty or infringements. There were about $100,000 in franchise deposits in a bank account, but New Oath and Kellogg withdrew those funds in their favor shortly after the acquisition, the lawsuit said. The profitability of the franchise stores remains unclear, as do the royalties due under the franchise agreements.

The settlement, reached in August, forced New Oath and Kellogg to return crucial intellectual property and franchise agreements to Next Level Pizza and pay $400,000, mainly to cover legal costs. In addition, Kellogg and New Oath agreed to a three-year non-compete agreement.

Oath Pizza was founded in 2015 on Nantucket Island. The brand describes itself as “reimagined pizza,” with a proprietary crust that is hand-stretched, grilled and seared in avocado oil, and topped with real, fresh ingredients as well as vegan and gluten-free ingredients. free options. Over the years, the company expanded to several states, such as New York, California, Pennsylvania, Ohio and Virginia. That included many college campuses, such as Arizona State and William Paterson University.

In October 2020, the chain struck a deal with Goldbelly to deliver pizza across the country. Around the same time, the brand opened a ghost kitchen in Philadelphia. In 2022, Oath Pizza announced a store revamp with inviting colors, airy interiors and a feel-good environment that everyone will love,” according to a press release.