ELDRIDGE, Iowa — Bettendorf-based restaurant chain Happy Joe's Pizza has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.
Happy Joe's President and CEO Thomas A. Sacco signed the voluntary petition filed on Sept. 2, the same day the company's public relations firm sent out an email saying the business "is undergoing a transformation into a revitalized, modern business model."
"The vast majority of Happy Joe's 50-plus locations are highly profitable, with its franchise restaurants leading the way having recently remodeled or are in the process of upgrading to the brand's modern new design, leading to higher guest satisfaction," the release says.
In that press release, the pizza chain boasts how it signed more franchise agreements and opened new locations in the last 18 months than during the previous decade. It also announces the bankruptcy filing, however, it never says the word "bankruptcy."
The release says Thomas Sacco "filed a plan of reorganization on two of the four corporate entities."
The first entity is the one that operates company restaurants while the second operates Tony Sacco's restaurants. Tony Sacco and Thomas Sacco are not related, according to the release.
"Both entities only operate company-owned restaurants and are not associated with any franchisee restaurants," the release says. "The two franchising entities – Happy Joe’s Franchising and Tony Sacco’s Franchising – were not part of the filing."
Thomas Sacco didn't join Happy Joe's until October 2020. He was tasked with finding problems within the company.
"The good news is that we are reinvigorating the Happy Joe’s brand, remodeling older restaurants, opening highly successful new franchise locations and entering new markets in Florida, Texas and Arizona – along with our international expansion into Egypt and throughout the Middle East," Thomas Sacco says in the press release. "All of this is contributing to a stronger and healthier business model that will be significantly more profitable going forward."
Back in July, Happy Joe's announced it'll be opening several new locations in Africa and the Middle East this year. In August, two franchise locations in eastern Iowa closed due to staffing issues.
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What does Chapter 11 bankruptcy mean?
Chapter 11 bankruptcy is commonly referred to as "reorganization" bankruptcy, according to the Administrative Office of the U.S. Courts. It doesn't necessarily mean a business will cease to exist.
The process begins with the filing of a petition with the bankruptcy court serving the area where the debtor has a domicile, residence or principal place of business. In Happy Joe's case, the debtors are based in Delaware: HJ Dynamic Holdings, LLC, TS Dynamic Acquisition, Inc., and TS Dynamic Holdings, LLC.
According to Nolo, an online legal encyclopedia, all chapters of bankruptcy work by halting the collection process, which stops most creditors from pursuing the filer. That gives the filer, creditors and the court more room to address finances in an organized fashion.
Things like payment requests, evictions or foreclosures temporarily stop.
Under Chapter 11, the filer still has control over the business. Payment plans are created to help the business get out of the debt it has accumulated. Nolo's website says most plans require some downsizing of the debtor's operations to reduce expenses and free up assets.
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