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One-Fifth of USA Pizza Hut Locations to Be Sold or Closed by Bankrupt Franchisee

By Rhian Hunt – Aug 17, 2020 at 3:10PM

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Approximately 1,200 of Yum!’s American Pizza Huts are affected by NPC’s Chapter 11 filing.

Long-term troubles with Yum! Brands' (YUM -0.81%) Pizza Hut chain came to a head today in the announced sale or closure of roughly 20% of its U.S. restaurants, according to Business Insider. NPC International, a franchisee operating 1,227 Pizza Huts along with 400 Wendy's restaurants, filed for Chapter 11 bankruptcy a month and a half ago. Now, the company is closing 300 Pizza Hut restaurants permanently in accordance with an agreement with Yum!, while putting the remainder of its franchised locations up for sale.

Pizza Hut's woes began long before coronavirus appeared on the economic horizon. In its bankruptcy protection filing, NPC International placed the blame squarely on Yum! itself. The franchisee stated, "Deteriorating brand recognition has been further exacerbated by decreased menu innovation and the lack of a clear, long-term strategy by the Pizza Hut Franchisor to address the brand issues to provide a clear and differentiated identity."

A young man delivering a stack of boxed pizzas.

Image source: Getty Images

Rather than collapsing as a result of the COVID-19 pandemic, the company said the virus and the take-out or delivery pizza orders it generated "unexpectedly provided some relief" from the years-long slump in restaurant performance.

The approximately 300 Pizza Huts earmarked for permanent closure are those which have been underperforming compared to the rest of NPC's portfolio. The Pizza Hut brand noted 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 shuttering of these locations also highlights the brand's shift toward online and delivery sales, since a "substantial majority" of those slated for closure feature dining rooms, according to NPC.

Yum!'s stock started inching lower around noon today but has begun to gain again in mid-afternoon trading.

Rhian Hunt has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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