Pizza Hut Restaurants UK’s Jens Hofma led a management buy-out of the business last year and is now intent on steering the high street dining stalwart to its next phase of growth. In an interview on stage at the Casual Dining Show, he candidly discussed the challenges and obstacles that lie in wait for the business, and shared his account of how the brand has achieved longevity in one of the most competitive sectors of the market.
On the evolution of Pizza Hut Restaurants UK…
Pizza Hut has evolved into more of an experiential brand than it used to be a decade ago. Prior to an MBO last year, it was owned for seven years by private equity firm Rutland Partners, which oversaw a £60m American-inspired refurbishment programme.
“We painted ourselves into a corner of being a very functional, value brand which didn’t really offer a very compelling guest experience until about seven or eight years ago,” admits chief executive Jens Hofma.
“It was maybe good enough in the 1980s and the 1990s, but considering where the casual dining sector has gone in the UK over the past 10 to 15 years we had to up our game to continue to be relevant to that market.
“A lot of what we have done, and what we have invested behind in the last seven or eight years, has been to create much more of an experience around Pizza Hut and ensure that we think through service, we think through menus and we think through decor, rather than just value and product,” he adds.
Hofma says there was a period where the business was declining at 4% to 5% a year in a growth market, so it needed to do something “very radical, very bold and very daring” to break that trend. Private equity ownership provided it with a clear five-year investment horizon and cash to spend on refurbishing restaurants, upgrading menus and improving service and operational standards.
The investment certainly appears to have paid off. Average spend per head over the past five years has increased from around £8 to £11, which Hofma says “completely changes the architect of your P&L value base”.
On the misperception of Pizza Hut as a fast food operation…
Pizza Hut operates 260 restaurants employing 7,000 staff in the UK, where it has been present for the best part of 45 years. Yet although the company is one of the most recognised brands in the business and prides itself on delivering a full-service restaurant offer, it is often mistakingly perceived by customers as a fast food operation.
How does Hofma handle that? “I used to be massively irritated by it because we are really a casual dining brand. But in the current market, where the lines are blurring between QSR, fast casual and casual dining it is actually a pretty good place to be.
“We have been successfully introducing elements of self-service as part of a concept which helps us to manage our labour and basically create a very effective operating system, so the fact that Pizza Hut cannot be easily pigeonholed in either fast casual, casual dining or fast food is positive.”
On the brand’s position in a UK pizza sector that has undergone dramatic transformation…
The pizza market has become increasingly crowded in recent years, but much of that can be attributed to the emergence of Italian-focused and artisan pizza brands. While this has added to the overall level of competition Pizza Hut faces, few brands of any real significance have infringed upon the chain’s core menu proposition.
“I think what sets Pizza Hut apart is actually a very bold American taste of pizza,” says Hofma. “We are not trying to be authentic Italian pizza in the same way as Pizza Express or Zizzi — we are resolutely an American pizza brand. It comes not just with a different type of menu but also a service style and an environment that is very informal and easy going, and that’s what we have really brought to life in the Pizza Hut concept.”
While Pizza Hut might not be known for the authentic thin-crust pizza that appears to be on trend, Hofma says it’s not what people visit its restaurants for anyway. “They don’t come to Pizza Hut for sophisticated food, they come for tasty food, they come for quality food and they come for food that is prepared with a passion. Our differentiated proposition within that pizza market is that we are American ‘takeaway’ pizza. We are fairly unique in that particular market and we are very affordable.
“I think the most important differentiator in the market — and it sounds boring but it is true — continues to be this consistent operational execution day after day after day after day. That is so often where brands go wrong. They can be exciting, new, have a great proposition and look amazing, but once all the glamour of restaurant design and new openings is over you have got to get into the daily grind of how you run the right operation across 260 sites, 365 days a year. And I think, for me, that is the most important thing.”
On serving the family market without letting it define the business…
Pizza Hut has always attracted a loyal family following, which Hofma puts down to the fact that its restaurants are not stuffy, formal environments and therefore regarded as approachable and accessible for those with children. But he is wily enough to know that it would be a disaster for the chain to put all its eggs in one basket.
We have been successfully introducing elements of self-service as part of a concept which helps us to manage our labour and create a very effective operating system”
“To create a restaurant brand that only caters to families is a bit of a trap because families are only out at particular times of the day, particular days of the week, particular weeks of the year, so if families are the only target group that you are relying on, things don’t tend to go particularly well for restaurant concepts. While we are very focused on families, we also need to make sure we are relevant for other target groups, particularly young adults,” he explains.
On growing a restaurant business without acquiring or opening new stores…
While the market has been characterised by chain operators opening dozens of new restaurants in recent years, Pizza Hut was one of the few businesses that bucked that trend by instead focusing on trying to enhance its existing estate.
Some of what it currently sees in the market is therefore familiar, says Hofma, who works regular shifts as a team member — “I take four or five tables and make a bit of a fool of myself!” — to ensure he remains connected to the grassroots.
“For the past seven or eight years we have experienced what some operators are really starting to experience now and that is the challenge of growing your business organically rather than literally relying on launches all the time, and that does create a very different dynamic in the business.
“It is quite sexy and quite attractive to build new restaurants all the time, and it is a great way of getting into profit growth, but in the end what you also need to be able to do as a restaurant operator is to manage the detail of your day-to-day operations and think about how you get more out of your exiting estate.”
On running restaurants under different types of ownership…
Under Hofma’s leadership, Pizza Hut Restaurants has seen three different ownership cycles. He started in a very corporate role when the business was owned by Yum! Brands (which still owns the Pizza Hut brand) before it moved into a five-year private equity cycle. Last year he led an MBO.
“I have been able to see the huge differences in dynamics that these ownership situations create. I think that the very fundamental turnaround that the brand required seven years ago was always going to be impossible in a corporately-owned setting, where there is so much pressure on delivering quarterly results.
“The brand was too far gone and required too much work to be ‘turnaround-able’ in a corporate environment, so private equity ownership from a turnaround specialist — which Rutland Partners is — was exactly the right type of ownership for where we were at the time. And they brought into a turnaround plan in order to grow. They stopped all unit growth and they invested everything into upgrading our existing estate. That was a very clear, very single-minded approach.”
Hofma credits Yum! with giving it an “extraordinary amount of freedom and flexibility” within a franchise environment to shape the business in the way it proposed. And he places huge importance on the value of having owners suited to the strategy.
“I do think that leadership also means actively influencing where that ownership goes and ensuring your business comes with the right kind of ownership for what that business needs. And together with my team, I have always taken a very active role in, first of all convincing Yum! that Rutland was going to be very decent owners in terms of the next phase, and then actually putting our money where our mouth was about a year ago by saying to them that I wanted to buy the business. So it is not just about ownership impacting on management, I think management should also impact on ownership.”
On the restaurant brands that he most admires…
Jens Hofma is one of the most experienced operators in the business, so he knows just what it takes to flourish in the fast-moving multi-site restaurant sector. He says he admires McDonald’s purely for its longevity and its success at creating such a scalable operational model, while Nando’s and Wagamama also win his admiration.
“I think what Nando’s has achieved in this market is unbelievable and fantastic. I think it has something to do with their ownership model — it is a brand that knows how to slow down their growth, how to take a step back in order to move forward, and it is a brand that has consistently been managed with the long term in mind. I think as a result of that they are now harvesting their success.”
“Wagamama is another standout success story in the market — again a brand that started many years ago and for a very long time grew very slowly and learnt from that bed of experience and created a platform for accelerated growth. They had long-term vision, patience and not were not too greedy too quickly in this sector.”