MOD Pizza has agreed to a sale in a deal that could save the fast-casual pizza chain from what many saw as an impending bankruptcy filing.
The Bellevue, Washington-based chain said Wednesday that it has been acquired by Southern California-based Elite Restaurant Group.
Terms were not disclosed. But with the deal, MOD officials hope to restructure debt and shore up the 512-unit chain’s capital base.
Elite has been a collector of financially troubled restaurant brands over the years. Led by Michael Nakhleh, the former Sizzler and Fatburger franchise operator has acquired brands like Slater’s 50/50, pizza concepts Project Pie and Patxi’s Pizza, family-dining chain Marie Callender's, as well as the Mediterranean concepts Daphne’s and Noon Mediterranean, and cupcake chain Gigi’s Cupcakes. It's not clear whether those brands remain in Elite's portfolio.
Nakhleh in a statement said, “MOD has an outstanding culture and passionate, loyal guests and employees. We recognize the inherent value this represents and look forward to helping MOD write the next chapter in its history.”
Last week, reports indicated MOD was considering a Chapter 11 filing as the company worked to improve its capital structure. In a statement at the time, company officials said they were exploring all options, and that a “solid turnaround plan was underway that is making progress.”
That plan has included “rightsizing the portfolio,” as well as refreshing the brand and elevating the guest experience, the company said Wednesday, though no details were offered. Year to date, 44 underperforming restaurants have shuttered, all company owned, and it’s not clear whether more will close.
For years, MOD—known officially as MOD Super Fast Pizza Holdings LLC— was seen as the leader in the fast-casual pizza niche, growing to more than 500 units. Of the 512 currently, 89 are franchised.
It was founded by Scott and Ally Svenson in 2008, and was one of the first fast-casual pizza concepts to emerge in what soon became a crowded pack of contenders offering a walk-the-line, build-your-own personal, artisanal pizza, with as many as 40 toppings available for one price.
It quickly became a favorite of investors, and the chain raised a total of $345 million over the years, with investors that included Nigel Travis, the former chair and CEO of Dunkin’ Brands Group Inc., and Spencer Rascoff, CEO of the real estate website Zillow, as well as investment firms PWP Growth Equity, Fidelity Management & Research. Most recently, in 2019, MOD announced it had raised $160 million in equity financing from private-equity firm Clayton, Dubilier & Rice.
At the time, the company pledged to double its unit count to about 1,000 restaurants. That funding supported rapid expansion in a drive to earn national brand awareness, with the goal of going public. In 2021, the chain filed confidential plans for an initial public offering.
But the IPO never came to fruition and there were signs earlier this year that MOD was in serious trouble—perhaps in part because that rapid expansion resulted in poor real estate choices.
Scott Svenson in January stepped down as CEO, moving to an executive chairman role, and the company brought in former Cooper’s Hawk executive Beth Scott to take the helm. She took quick action.
In the first quarter, the company closed 26 restaurants, scattered across the country, in a culling of underperforming units. And the closures continued into the second quarter, for a total of 44.
The chain had ended 2023 with about 553 units, an increase of 4.1% over the prior year, according to Restaurant Business sister brand Technomic. MOD also generated an estimated $699 million in domestic sales, up 5.7%, and the average unit volume was $1.3 million, which increased from the AUV in 2022 of $1.2 million. But, because MOD is a private company, officials declined to verify those estimates.
MOD is not the only fast-casual pizza chain to face challenges.
The pandemic was not kind to fast-casual pizza, which was fundamentally designed to be a better alternative to legacy delivery brands like Domino’s and Pizza Hut. MOD’s style of pizza was best served hot out of the 800-degree ovens, and it made for a quick lunch for office workers.
But post-pandemic consumers gravitated to delivery and digital ordering (and chicken concepts), and many workers never returned to offices, changing the equation for fast-casual pizza’s lunch-focused real estate selections.
To address these challenges, competitor Blaze Pizza—which last year saw its unit count shrink 2.3% to 295, recently unveiled a brand overhaul that includes a new menu. Last year &Pizza brought in a new CEO with the hope of bringing the brand’s edginess back. Pieology also closed restaurants in 2023, with its unit count down 8.4% to 109, according to Technomic.
MOD has long been known for its mission-driven employee culture. The Svensons were believers in the idea of second chances, and the chain made a point of welcoming workers from all walks of life, including those with challenging backgrounds, like previous incarceration, homelessness or those with developmental disabilities.
It’s not clear whether that mission will change under new ownership.
“MOD is a beloved brand with a strong following,” said CEO Beth Scott, in a statement about the sale. “We’re excited to work with Elite Restaurant Group to strengthen MOD’s future.”
Members help make our journalism possible. Become a Restaurant Business member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.