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At 60, Pizza Hut makes 500-store move to become delivery-devoted brand

During Yum Brands' Q2 financial report conference call this week, the multi-brand company set off something of a pizza industry bomb when CEO Greg Creed mentioned the brand was moving toward temporarily closing nearly 500 of its 7,500 U.S. stores.

August 2, 2019 by S.A. Whitehead — Food Editor, Net World Media Group

During Yum Brands' Q2 financial report conference call this week, the multi-brand company set off something of a pizza industry bomb when CEO Greg Creed mentioned the brand was moving toward temporarily closing nearly 500 of its 7,500 U.S. stores. But that's really just the top-line take-away of a larger story of the No. 2-selling pizza brand's efforts to aim the brand more at delivery-centered operations with a fast casual mindset, according to Creed's comments during the call. 

Creed and Yum Brands CFO David Gibbs said the effort would take place to transition the brand to be more responsive to overall restaurant and pizza market conditions nationally. Or as Creed put it during the conference call, "we understand more clearly than ever that same store sales growth in the U.S. will continue to be choppy without transforming the asset base."
Creed went on to say that's why the company is moving forward more quickly to convert Pizza Hut U.S. to a delivery/carryout model by working with well-performing franchisees to close underperforming dine-in units and replace them with "delivery or fast casual delivery assets."

That means also, he said, that some franchisees who are heavy with debt or lack capital and commitment — especially dine-in operations — will be, as Creed put it, "restructured."
Yum Brands President and COO David Gibbs dove deeper, explaining that these changes would happen over the next 24 months to essentially redirect the brand for the future when conditions will change in the pizza category.

"The factors such as growing urban population, escalating disposable income, increasing youth population, accelerating fast food pizza market and rising pizza franchisees are expected to drive the market," Gibbs told investors. "However, growth of the industry would be challenged by fluctuating pizza ingredients price and operational risk. A few notable trends include accelerating online pizza industry in developed economies, inclining demand for frozen pizza, expanding topping choices by pizza restaurants, rising preference for gluten-free pizza and growing adoption of social media advertising tools."

Outside of the U.S. Gibbs made a point to also highlight the brand's European business, which is also facing some market upheaval, particularly in the areas where the brand is showing its strongest sales. 

"The fastest growing regional market is Europe owing to rising demand for frozen and gluten pizza in Norway and Sweden, increasing penetration of online pizza delivering companies in France and growing adoption of multiple sales channels by domestic pizza outlets," Gibbs said during the call.

Pizza Marketplace has requested more detail about the timeline and nature of the 24-month transition of stores in the U.S. and will report back as information becomes available. Pizza Hut's nearly 7,500 U.S. stores, include a substantial 6,100 dine-in operations, along with 1,300 express stores specializing in carryout and delivery.

Photo: iStock

About S.A. Whitehead

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Pizza Marketplace and QSRweb editor Shelly Whitehead is a former newspaper and TV reporter with an affinity for telling stories about the people and innovative thinking behind great brands.