Will Pizza Hut’s Largest U.S. Franchisee Declare Bankruptcy?

According to a report in CNBC, a franchisee of over 1,200 Pizza Hut locations and almost 400 Wendy’s is facing a pretty steep financial crisis. NPC International is one of the largest restaurant groups in the country, but it is currently negotiating with lenders to manage nearly $1 billion in debt. 

Pizza Hut has been notably struggling for years, the cause of which is linked to high labor and product costs, as well as the increase in consumers looking for delivery options. Back in August of 2019, Pizza Hut announced that it would be temporarily closing 500 stores. The end goal of this massive closure was to introduce a new restaurant model that would be more streamlined and better equipped to exclusively handle carry-out and delivery orders. 

Pizza Hut wasn’t the only brand attempting to adapt to a new consumer climate in this way. Chipotle also began prioritizing mobile pick-up and third-party delivery options with “Chipotlanes,” or a dedicated mobile order and delivery pick-up lane. 

Still, this model has clearly proven to be more successful with some restaurants than it has for others. CNBC reported that same-store sales at Pizza Hut locations systemwide fell 2% in the fourth quarter. That might not seem too bad, but there’s a pretty glaring disparity when compared to major competitors Domino’s Pizza, which experienced a stock surge of 24% after fourth-quarter earnings exceeded expectations. Part of Domino’s success is likely due to its refusal to partner with third-party delivery services like GrubHub, UberEats and DoorDash. Instead, Domino’s chose to optimize its own in-house delivery practices, including the opening of a tech testing center in what has been dubbed the “Innovation Garage.”

Read the full story on NPC International in CNBC here.