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Papa John's franchisee files Ch. 11 amid lawsuits

Essential Pizza, the franchise operator of 72 Papa John’s units in Minnesota and Colorado, filed for Chapter 11 bankruptcy protection this week after multiple lawsuits from lenders and delivery drivers, and one against the franchisor.

Baltimore-based Essential Pizza, which acquired the Papa John’s units in 2007, asked the U.S. Bankruptcy Court for the District of Maryland Thursday to free up funds to pay the group’s estimated 1,200 employees and continue operations, according to court filings.

In August, Essential Pizza was sued by lender GE Capital Corp. for breach of contract after falling into default on a loan that helped the franchisee acquire the Papa John’s operation in 2007 for $11.2 million from private-equity firm Blackstreet Capital Partners. At the time, the group included 82 units, according to court documents.

Essential Pizza is also reportedly embroiled in an ongoing lawsuit against franchisor Papa John’s International related to that acquisition. In that lawsuit, attorneys for Essential Pizza argued that Papa John’s failed to disclose tax and other liabilities for the then underperforming group of restaurants.

Among the liabilities is a class-action lawsuit filed by delivery drivers in Colorado and Minnesota.

The delivery drivers have charged the franchisee with violations of the Fair Labor Standards Act, arguing that they were paid less than the federal and state minimum wages because they were not reimbursed for car costs, the purchase and maintenance of uniforms, and other job-related expenses, according to court filings.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout

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