Pandemic leaves Pizza Hut UK franchisee swallowing £18m loss

10 July 2017.The new Pizza Hut restaurant at White Rose Centre, Leeds.

Pizza Hut (UK) Limited said it had to “resort to extraordinary measures and appeal to generous support” to navigate the financial impact of the crisis due to the extent to which the casual dining and fast casual segments were hit last year.

The company has just signed off its accounts for the 12 months to 29 November, which revealed that sales plummeted 39% to £129m, while losses increased from £3m to £18m.

Pizza Hut (UK) Limited is the franchisee for the brand’s dine-in restaurant operations in the UK and is entirely separate from the delivery side of the business.

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The accounts reinforce the measures it was forced to take as the bottom fell out the market following the introduction of coronavirus restrictions.

This included securing a new £15m credit line by its lenders Pricoa Capital, utilising government support in the form of the furlough scheme and other tax reduction initiatives, and renegotiating rent terms with landlords. 29 restaurants were closed as a result of a CVA last September.

The company also credited the “voluntary salary sacrifice” by many of its employees and the “solidarity” demonstrated by its supplier base and franchisor for helping it through the slump.

Pizza Hut (UK) Limited director Andy Platt wrote in the report that the chain, which operates 214 restaurants in the UK, was now in a “position to rebuild our business” and said its strategy had “gained in boldness and clarity” in the wake of the pandemic.

At he same time, Mr Platt wrote that “necessity has been the mother of invention” and many innovations that would in normal times have developed slowly and cautiously had been accelerated dramatically.

“Three examples within the company include the rapid development and successful implementation of a mobile-device ordering programme, a move to a completely cashless operating model and a striking acceleration of our capability to offer guests the option of enjoying our mouth-watering menu in the comfort of their homes, either via contactless collection at the restaurant or through delivery partners. This latter development has positioned the business well to compete within the growing market for eating-at-home options.”

Management believe the long-term fundamentals of the market, grounded in long-term economic growth, growth in real earnings and the highly valued experience of eat out, continue to be strong, Mr Platt added.

“This creates new and exciting growth opportunities for businesses that are willing to evolve and respond to shifting consumer behaviours. Having weathered the storm, and with the benefit of backing from our committed investors and lenders, the company is well-placed to seize these opportunities in the months and years ahead.”

Pizza Hut plans to build on its more contemporary fast casual guest experience and menu to unlock capacity and drive footfall in its existing estate, continue to drive the takeaway and aggregator delivery sales layers developed during the crisis through competitive pricing, relevant consumer communication and a frictionless guest experience.

It will also seek to reframe its business as the “largest, most professional franchisee” in the UK” and partner with additional brands to broaden its portfolio and reignite its new store opening programme.

At the time of writing, the company has entered into a franchise agreement with Itsu and opened its first shop in Reading, by converting a former Pizza Hut. The new site is performing strongly and ahead of business case expectations.

Pizza Hut to relinquish 29 restaurants if it can strike deal with creditors

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Andrew Seymour

The author Andrew Seymour

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