Papa John's Bankruptcy Stops Paychecks for Many Employees

October 5, 2011

By: John Clark

When a company files for bankruptcy, employees often worry about the future viability of their jobs. Uncertainty surrounding the fate of the company after bankruptcy can lead to stressful times for loyal workers.

Most employees, though, assume that a bankruptcy filing will not prevent them from receiving their latest paychecks.

The employees of a major franchisee of the Papa John's pizza chain, however, recently discovered that their paychecks have been put on hold while the owner goes through Chapter 11 bankruptcy.

PJCOMN Acquisition Corp., which owns more than 70 Papa John's franchises, recently filed for bankruptcy, according to the Denver Post.

Sources indicate that financial confusion within the company led to checks being withheld or simply bouncing for more than 1,000 Papa John's employees in Colorado and Minnesota.

Representatives for PJCOMN Acquisition Corp. claim that the confusion was caused by banks, not the company, and that the company fully intends to eventually compensate the employees for their work.

In response to the financial funny business, a bankruptcy judge reportedly recently ordered the company to send out the missed checks, though it remains unclear when these checks will eventually make their way into employees’ wallets.

The majority of the restaurants affected by PJCOMN's bankruptcy are located in Denver and Colorado Springs. According to bankruptcy records, the pizza franchisee owes between $10 million and $50 million to hundreds of different creditors.

Notable creditors include the Colorado Department of Revenue, which is owed more than $100,000, and the Colorado Rockies baseball team, which hasn’t seen more than $60,000 owed by the pizza franchisee.

The parent company of PJCOMN, known as Essential Pizza, is not going down without a fight. According to the Denver Post, Essential Pizza believes it was duped by Papa John's International, Inc., when it purchased the franchise rights from the pizza company’s parent organization.

In a recent lawsuit filed by Essential Pizza, the company argues that Papa John's International did not tell the buyer about a $1.2 million tax liability that Essential Pizza would incur when it bought the pizza franchises.

Papa John's International emphatically denies this claim, and argues that the lawsuit is frivolous.

While the employees will eventually get paid, it appears that these two companies and their attorneys may battle for years to determine which entity is responsible for the pizza restaurants' financial woes.