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Pizza Hut franchisee: High confidence in brand relaunch despite minimal testing

NPC International CEO said the menu changes are in response to consumer demand for more flavor, customization.

November 17, 2014 by Alicia Kelso — Editor, QSRWeb.com

NPC International – Pizza Hut's largest franchisee – reported its Q3 results during an earnings call this morning, which included a comp store sales decrease of 0.7 percent. This is compared to last year's Q3 decrease of 3.6 percent.

CEO Jim Schwartz said the Pizza Hut business has strengthened significantly due in large part to progress made in its promotional strategy.

Additionally, the company is yielding big results from its digital initiatives and is generating 40 percent more business from its digital channels than it was this time last year. Over 50 percent of its digital business comes from mobile.

"We know this plays a significant role in a more balanced promotional strategy and improved margin trend," Schwartz said.

Brand relaunch

Digital and promotional progress aside, the big news from the call surrounded Pizza Hut's recently announced brand overhaul, which includes an extensive new menu, packaging, logo, website, employee uniform and more.

"The goal is to build off of Pizza Hut's strong foundation as a category leader and allow consumers to explore new frontiers by giving them pizza options they didn't know they could enjoy," Schwartz said. "We've been working on this plan for some time and we're anxious to bring this to market."

He added that the brand hopes to continue improving its positioning with "category switchers" and millennials. The rebrand has been supported by an extensive PR campaign that has generated nearly 1 billion impressions thus far, Schwartz said, and has built pent-up demand.

"There are not many people who don't know something new is going to occur and we're highly excited about that. But with any pent-up demand, we know we have to execute," he said.

To do that, he said the company has done the following:

• Taken the complexity out of existing operations before reintroducing new complexities. This effort began about two months ago. "We began to re-scale and change the processes in which we execute our food. It took some training and we had over 1,000 above-store leaders in Dallas over two weeks to begin the process," Schwartz said.
• The second piece requires bringing in new ingredients and retraining employees how to make pizzas with multiple crust and drizzle options. This took "a lot more" training and Schwartz said the teams are up to speed and will start making those new recipes in store today.

With all the changes taking place, the food is the focal point.

"It's awesome food. We think food is the ultimate differentiator in the category. Food drives the brand and is the soul of our brand. Our overall differentiation is to bring the best food and nobody will be doing it better than us," Schwartz said.

NPC's CFO Troy Cook estimated the cost of this rollout, including product investments and labor training, is about $2.5 million.

"It is a significant investment without a doubt, but one we think is well worth it," he said, adding that a majority of the impact will be felt in Q4.

Schwartz said there has already been some check improvement as a result of the changes, especially since many of the new recipes are higher than the brand's every day promotional pizza. He adds that it's worth it, too, because it's what consumers want.

"Consumers tell us they want their food to be great, and that they want new flavor options. Our palates are much more flavorable than they were 10, 20 years ago. Secondly, they want the food to be highly customizable. So they want to enjoy a flavor experience and do it their way," Schwartz said. "The consumer tell us this is what they're looking for. They can find it, but not with the consistency and depth of the opportunity at a chain as big as Pizza Hut."

Schwartz said he is confident despite the minimal market testing of the new offerings, a decision that was made because of the competitive and confidential nature of the market.

"Consumers are already talking about it," he said. "We think it's very exciting for the consumer. We think they're going to love it."

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