The struggling Pizza Hut restaurant chain is being sold by its parent company, Yum Brands, in two separate deals totaling $2.7 billion. Private equity firm LongRange Capital will acquire Pizza Hut’s operations outside of mainland China for approximately $1.5 billion. Concurrently, Yum China Holdings Inc. is purchasing the mainland China Pizza Hut business for about $1.2 billion. This divestiture allows Yum Brands to concentrate on its more successful brands like KFC and Taco Bell, as Pizza Hut has faced challenges with outdated stores and declining sales.
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In response to declining U.S. same-store sales and outdated store formats, Pizza Hut intends to shutter 250 underperforming domestic locations during the first half of this year. This strategic move by parent company Yum Brands coincides with a formal review of options for the pizza chain, which has faced increasing competition. While U.S. performance has faltered, Pizza Hut has seen stronger results internationally, particularly in Asia, the Middle East, and Latin America. Yum Brands anticipates completing its review of strategic alternatives for Pizza Hut within the current year.
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Yum Brands, Pizza Hut’s parent company, is currently reviewing strategic options for the pizza chain, which may include a potential sale. Despite strong international sales and a global presence with nearly 20,000 stores, the brand has struggled, especially in the US market, with a 7% sales decrease in the first nine months of the year. CEO Chris Turner believes Pizza Hut’s full value might be better realized outside Yum Brands. The company has not set a deadline for the review and will not provide further comments.
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John Q. Hosedrinker