Pizza Hut’s decline, coupled with pandemic, pushes Leawood franchisee to bankruptcy
NPC International, the world’s largest franchisee of Pizza Hut, filed for Chapter 11 bankruptcy on Wednesday, a victim of new consumer preferences coupled with financial pressure from the coronavirus pandemic.
The company, which also operates hundreds of Wendy’s fast food locations, said it is looking to reduce its long-term debt through bankruptcy. A filing said NPC had $903 million in total funded debt.
“As our industry has been in the midst of dynamic changes due to shifting consumer preferences and dining behavior, we also have been facing increased labor and commodities costs and a higher level of financial leverage that presents obstacles to achieving our long-term business objectives,” said Jon Weber, president and chief executive of NPC’s Pizza Hut division, adding that the coronavirus pandemic amplified those challenges.
NPC operates 1,227 Pizza hut locations in 27 states, representing about 20% of the Pizza Hut system in the United States. The Leawood company also operates 393 Wendy’s locations.
In the filing, NPC described how Pizza Hut’s suffering fortunes in recent years cut into the company’s profitability and liquidity.
NPC said Pizza Hut lacks innovation and a long-term strategy, causing its brand to diminish as it loses market share to competitors.
The chain can’t draw foot traffic it once did, NPC said. Efforts to regain customer support through discount promotions proved unsustainable as it didn’t have much effect on sales and eroded profitability.
Wendy’s, on the other hand, had been a brighter spot in NPC’s business.
The pandemic helped Pizza Hut somewhat due to increased deliveries. But both the limitation on dining- in for several months coupled with the increased cost of restaurant safety measures, accelerated NPC’s difficulties.
Pizza Hut, whose parent company is Yum! Brands, said in a statement that many of the chain’s 110 other franchisees are “moving in the right direction” under new leadership for the U.S. brand and a broader transformation strategy.
“While NPC’s Chapter 11 filing was expected, we view it as an opportunity to create a better future for NPC’s Pizza Hut restaurants,” A Pizza Hut spokesperson said in a statement. “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.”
NPC said that minimum wage increases and commodity pricing also hurt the company’s business.
NPC will continue to operate its locations during the bankruptcy. NPC employs 7,500 full-time employees and 28,500 part-time employees.
NPC opened its first Pizza Hut franchise in 1962 in Pittsburg, Kansas.
This story was originally published July 1, 2020 at 10:30 AM.
