Popular California Pizza Chain Announces Closure of 27 Locations

However, MOD Pizza has just closed 27 of its locations around the US without any warning or announcement explaining why, even to their now out-of-work employees. 

But MOD Pizza has something no other fast-food pizza restaurant does. When it opened its first restaurant in Seattle, Washington, in 2008, it boasted made-to-order pizzas with all fresh ingredients, ready in just minutes. Like Subway or Chipotle, customers could completely customize their orders and walk out the door with a freshly baked pizza in no time. 

It’s important to understand that MOD never really rivaled the big names, but it certainly made enough money in its unique market to be considered a top contender for fast food pizza.

Financially, the company has been doing well. In fact, it reported a net revenue of $398 million in 2023. And that is actually a slight increase from the years before, showing that MOD was actually improving its overall sales. 

Many are considering one hint when guessing what has gone wrong: five of the recently closed locations were in the state of California. 

And because the company has so many restaurants in the Golden State, many are arguing that the most likely reason for the closings is that California has just raised its minimum wage for all fast food workers. 

The legislation has sparked quite a debate around the state and the country. Many argue that it’s a fantastic step forward for underpaid Americans, whereas others say it’s going to cause significant closings and even layoffs throughout the industry. 

Although no company has formally announced that it will be closing any of its California locations, the vast majority of people believe that this is exactly why MOD Pizza shut down 27 restaurants this month. 

The anonymous employee is, of course, disappointed. They were expecting a raise and, instead, were sent packing. The former MOD Pizza employee said, “I mean, nobody is going to turn down a raise, but at the end of the day, with repercussions like this, was it worth it?”

Apparently, at one location, the employees were gifted $2,000 each as severance pay. However, in others, such as one restaurant in Wisconsin, the employees weren’t even able to collect their final paychecks, let alone severance. 

Some, like the former MOD Pizza employee, believe that an extra $4 an hour simply isn’t worth the real cost of the increase. That cost, of course, is that hundreds or even thousands of Americans who work in the fast food industry could lose their jobs this year. 

For now, what’s new for MOD Pizza is anyone’s guess. They could simply be cutting down on costs in order to increase net profits, they could be responding to Gov. Newsom’s legislation, or it could mean they’re actually struggling and will be closing down more locations to stay afloat. We will have to wait and see what they say about the matter. 

These challenges are not only squeezing profit margins but also forcing many chains to rethink their business strategies. As consumer priorities shift towards healthier options and value for money, even established chains are finding it difficult to maintain their market position.

This legislative change has pushed labor costs up, compelling chains like Chipotle and McDonald’s to hike their prices. For smaller or similarly positioned chains like MOD Pizza, these increases strain operational budgets, potentially leading to location closures or reduced staffing.

For businesses like MOD Pizza, managing these costs without compromising on customer experience or product quality remains a daunting challenge.

This shift can significantly affect chains known for low-cost meals, impacting their overall sales and customer base.

These innovations reduce the need for a large workforce, thereby controlling costs. However, while this shift helps maintain profit margins, it also raises concerns about job losses within the industry.

These franchise owners must adhere to corporate standards while managing higher costs, which can squeeze their margins tighter than those of directly operated locations.

These strategic closures often reflect deeper financial issues or market repositioning efforts, illustrating the volatile nature of the industry.

This shift has impacted traditional fast food chains, prompting them to adjust their menus and marketing strategies. Chains that fail to adapt risk losing relevance and market share to more agile competitors.

Although painful in the short term, these decisions can help a company stabilize its finances and refine its business model for long-term sustainability.

From wage laws to health regulations, these hurdles can complicate operations and necessitate additional resources, impacting profitability and operational flexibility.

Meeting these expectations not only appeals to consumer preferences but also contributes to a brand’s long-term viability and public image.

As automation becomes more prevalent, the traditional roles within restaurants are being redefined, potentially leading to fewer jobs but more specialized positions focused on customer service and technology management.