Iowa-based Happy Joe’s Pizza & Ice Cream filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court in Delaware—some not-so-happy news for two of its company-owned restaurants, which subsequently closed. Franchise locations were not a part of the September 2 filing and will not be impacted.
Rising food and labor costs, recessionary fears and outdated restaurant models were blamed for the decision.
Tom Sacco, CEO of parent company Dynamic Restaurant Holdings—which acquired a majority stake in Happy Joe’s and Tony Sacco’s in 2017—filed a plan to reorganize both brand’s company restaurants. (Tom Sacco and Tony Sacco are not related.)
Tom Sacco became CEO of Happy Joe’s in October 2020 and was tasked with modernizing the 50-year-old Midwestern brand.
“We believe this restructuring will help us strengthen the entire system. By closing underperforming locations, largely due to sky-high lease agreements, we now have the ability to develop a stronger brand,” Sacco said.
While two Happy Joe’s restaurants have closed—which had not been remodeled in nearly two decades—five other company-owned locations are expected to remain open, according to Sacco.
Despite the news, Happy Joe’s has signed more franchise agreements and opened more new locations over the last 18 months than at any other point in the last decade, Sacco noted, adding the vast majority of Happy Joe’s 38 franchise locations are “highly profitable” and have been recently remodeled, or are in the process of doing so.
Average gross sales in 2021 for full-size franchised restaurants were $1.2 million for the top quartile and $446,785 for the bottom quartile, according to Happy Joe’s franchise disclosure document.
“This restructuring was the right thing to do for the long-term health of the Happy Joe’s brand,” Sacco said. “We simply couldn’t continue to deplete our strong flow of franchise revenue to cover the losses from our company stores, some of which are underperforming due to outrageous rents and rapidly increasing operating costs.”
Sacco became CEO of Happy Joe’s in October 2020 and was tasked with modernizing the 50-year-old Midwestern brand, including restructuring and refreshing the business model for future success. Sacco previously led the image refresh and revitalization at Ponderosa Steakhouse & Buffet and Bonanza Family Restaurants. Sacco also helped lead national expansion at Red Robin Gourmet Burgers, BJ’s Restaurant & Brewhouse and Ghirardelli Chocolate & Ice Cream Shoppes.
On Tuesday, Happy Joe’s announced its newest franchisees Travis and Heather Potts signed an agreement to bring the brand to their hometown of St. Louis, Missouri, set to open in the first quarter of 2023. The brand plans to continue expanding further into Missouri, Sacco said, as well as entering new markets in Florida, Texas and Arizona.
Last year, the brand opened two franchise stores and inked a master franchise agreement with H.J. Happy Joe’s for Restaurants, led by Ahmed Elbatran, to open at least 25 new restaurants throughout the Middle East and North Africa, with the potential to operate between 50 and 75 Happy Joe’s across the region.
Happy Joe’s posted $38 million in systemwide sales in 2021, a decrease of 2.6 percent over 2020.