NPC International, the largest Pizza Hut and Wendy’s franchisee in the U.S., plans to close as many as 300 Pizza Hut restaurants after a deal was reached to pave the way for a sale of the company’s remaining pizza locations, CNBC reported.
Under the terms of the bankruptcy agreement between Yum Brands, the Kentucky-based operator of the pizza chain and NPC, NPC has agreed to pay Pizza Hut in exchange for the ability to close the restaurants, according to the report.
The arrangement also requires NPC to sell the remaining 927 Pizza Hut locations. The franchisee, which also operates about 400 Wendy’s restaurants, filed for Chapter 11 bankruptcy protection last month amid $1 billion in debt, CNBC reported.
“We have continued to work with NPC and its lenders to optimize NPC’s Pizza Hut restaurant footprint and strengthen the portfolio for the future,” Pizza Hut said in a statement. “Today’s joint agreement to close up to 300 NPC Pizza Hut restaurants is an important step toward a healthier business ... the locations significantly underperform the rest of NPC’s Pizza Hut system.”
NPC’s 1,227 Pizza Hut locations account for one-fifth of the chain’s locations.
A majority of the restaurants to be closed are red roof locations from which Pizza Hut has been trying to move as the company transitions to a delivery and take out model, according to court documents.
The locations are struggling due to the condition of the property, the location, changing demographics, or their closeness to other NPC restaurants in the same area, the filing said.
CNBC reported workers at the closed Pizza Hut restaurants operated by NPC will be transferred to other locations, if possible. It’s unclear which locations will close or when.
Pizza Hut’s troubles began well before the pandemic struck. Same-store sales at U.S. restaurants fell 4 percent during the pizza chain’s fourth quarter in 2019.
Analysts have said the restaurant chain has struggled with high food and labor costs, and troubles with its implementation of home delivery, most of which is serviced by DoorDash.
In contrast, last month Yum Brands reported its second quarter digital sales grew to an all-time high of $3.5 billion, up by more than $1 billion from the past year.
“We now have over 34,000 restaurants offering delivery around the world, representing a 13 percent increase year over year in part driven by expanded aggregator partnerships,” CEO David Gibbs said on an earnings call with analysts.