The largest franchisee in the US has filed for bankruptcy.
Yesterday, 1 JULY 2020, NPC International — a company that owns and operates more than 1,200 Pizza Hut and nearly 400 Wendy's restaurants — filed for Chapter 11 protection in the Texas Southern Bankruptcy Court.
According to Business Insider, NPC has struggled financially in recent years, in large part because of the performance of its 1,227 Pizza Hut restaurants, which make up about 20% of all of the chain's US locations, according to the company's filing.
Pizza Hut has struggled to grow same-store sales across the system, as rivals such as Domino's and Papa John's have thrived.
"Deteriorating brand recognition has been further exacerbated by decreased menu innovation and the lack of a clear, long-term strategy by the Pizza Hut Franchisor to address the brand issues to provide a clear and differentiated identity," the filing said.
The Coronavirus pandemic "unexpectedly provided some relief" for NPC, as Wendy's offered franchisees concessions, and Pizza Hut saw sales grow as customers ordered more delivery.
However, new safety measures have been expensive, costing the company about $750,000 per month (RM3.2 Million).
NPC said in the filing that Pizza Hut sales were once again declining and the pandemic has contributed to longer-term issues, such as rising labor costs and the availability of ingredients, including fresh beef.
The bankruptcy filing does not mean that NPC will close Pizza Hut or Wendy's locations.
Instead, NPC is attempting to reduce debts, including plans to sell some of its restaurants.
Pizza Hut said in a statement NPC's filing was "expected" and that the chain viewed it as "an opportunity to create a better future for NPC's Pizza Hut restaurants."
"As NPC works through this process, we support an outcome resulting in an organization with a lower, more sustainable level of debt, ownership focus on operational excellence and a greater level of restaurant investment," the statement said.
"These changes will help NPC's Pizza Hut restaurants generate the same momentum we are seeing throughout the Pizza Hut US business and strengthen the overall health and performance of the entire system for the long term."
Rest assured, while Malaysia's Pizza Hut is under separate management, this news isn't good for your favourite Cheese topped pepperoni Pizza Chain.
Perhaps we may have really reached the era of small Niche hipster businesses instead of large conglomerate branded chains -- some like Pizza Mansion @ Section 17 PJ perhaps?