Franchising

Pizza Hut franchisee closing up to 300 stores

Pizza Hut's largest U.S. franchisee, NPC International, is closing up to 300 locations as part of its Chapter 11 bankruptcy proceedings.

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August 18, 2020

Pizza Hut andits franchisee, NPC International Inc., have agreed that NPC can close up to 300 of its mostly dine-in Pizza Hut stores as part of the company's restructuring and re-emergence from its recent declaration of Chapter 11 bankruptcy proceedings, according to a news release.

The deal followed what the two companies had said was an "extensive analysis" of NPC's complete portfolio of Pizza Hut holdings. An ad hoc group of NPC's first-lien lenders support the agreement.
A Pizza Hut spokesperson released this statement to Pizza Marketplace:

"Today's joint agreement to close up to 300 NPC Pizza Hut restaurants is an important step toward a healthier business. Closing these restaurants, which significantly underperform the rest of NPC's Pizza Hut system, will strengthen NPC's portfolio, resulting in the reallocation of employee resources to thriving locations across the business, where possible. …

"As NPC works through its restructuring, it will continue to make the advertising and royalty payments that benefit Pizza Hut franchisees in the U.S., many of whom are seeing encouraging results as we advance our broader transformation strategy. In fact, Yum! Brands recently reported strong Pizza Hut U.S. same-store sales growth in the second quarter, driven largely by its off-premise channel, which generated 21% same-store sales growth, when excluding the impact of Express units. The quarter also saw Pizza Hut's highest average sales week for delivery and carryout in the past eight years during the month of May."

The downsizing of NPC's Pizza Hut holding footprint is expected to increase the potential value that could be generated from the Pizza Hut business, either through its sale, reorganization or a combination of the two, the release said. NPC said the streamlined portfolio will allow the company to modernize its holdings in viable areas.

Pizza Hut said that if NPC sells its Pizza Hut business entirely, the brand would seek a strong owner with a "healthy balance sheet" and "growth mindset." It's still not clear what restaurants will close or when, but the two companies said they would try to reassign employees at those stores, where possible.

NPC Internationa is Pizza Hut's largest franchisee in the U.S., and its portfolio of 1,227 locations represents 20% of the Pizza Hut system's restaurant base nationally.