News

Pizza Inn comps down 3.5% for Q1

October 25, 2005

THE COLONY, Texas — The combination of declining sales and mounting legal fees amounted to a first quarter loss at 400-unit Pizza Inn.

According to a regulatory filing, the chain lost $393,000 during the 12 weeks ended Sept. 25, 2005. In the comparable period last year, the chain posted a profit of $285,000.

Revenue for Q1 '05 slid 11 percent to $12.9 million from $14.4 million last year. Fewer units in the comparable base, plus damage to stores by Hurricane Katrina, pushed comparable-store sales down 3.5 percent.

"Despite the temporary negative impact of Hurricane Katrina on our financial results, our primary concern is with the people of the Gulf Region and our operators there," said Pizza Inn president and chief executive Tim Taft. "We must, however, remain focused on the fundamentals of our business, from concept development to unit-level profitability. In the coming weeks we will introduce our new buffet concept in the Dallas and Houston markets, featuring a more progressive approach to our brand and its profitability."

In November, the company plans to introduce a new franchisee selection program that will target strategic markets throughout the chain.

Pizza Inn's involvement in several lawsuits cost it $363,000 during the period. The chain is being sued by former chief executive and president Ronald Parker and former vice president Keith Clark, who claim the company owes them $5.4 million and $768,000 respectively. Both men maintain Pizza Inn underwent a change of control in 2004 following changes to its board of directors. The new board makeup, they say, triggered massive payouts specified in their labor agreements.

Pizza Inn denies a change of control occurred and is in arbitration with Clark over the matter.

The chain is suing Parker (read Pizza Inn fights back), as well as its former outside legal counsel, Akin Gump, for colluding to rewrite the aforementioned employment agreements for Parker and Clark, and two other Pizza Inn executives still employed there. Those agreements, Pizza Inn said, could jeopardize the company's already tenuous financial condition because parachute payouts contained within them would amount to $7.4 million.

The company fired Parker in December 2004.