As consumers pull back on spending at restaurants in a troubled economy, Pizza Hut is feeling the pinch—in stark contrast to its chief rival, Domino’s Pizza.
Pizza Hut saw its U.S. same-store sales dip 6% in the first quarter of 2024 compared to Q1 in 2023. But the previous year’s performance, which saw an 8% rise in same-store sales, was a bit of an outlier, bolstered by the January 2023 revival of Pizza Hut’s Big New Yorker specialty pizza, a customer favorite from the 1990s, and the introduction of Menu Melts in October 2022.
Pizza Hut’s soft first quarter came as Domino’s reported a same-store sales increase of 5.6%, which Domino’s leadership attributed to its Hungry for MORE strategy launched last year.
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Pizza Hut, a division of Yum! Brands, is counting on technology to spur growth in the future. In a May 1 earnings call, Yum! Brands CEO David Gibbs said Yum! will continue adding Pizza Hut’s U.S. stores to its omnichannel e-commerce platform, which serves all of its brands, with a full cutover anticipated for the third quarter of 2024.
Additionally, Yum! Brands has onboarded more than 500 Pizza Hut stores—and counting—to its Dragontail AI platform. It’s meant to optimize and manage the entire food preparation process from order through delivery. The AI-based solution automates the kitchen flow combined with the process of dispatching drivers. It helps restaurants sequence and time each order, plan optimal delivery routes and combine delivery orders by location. The technology also lets customers track their orders en route and can operate with third-party delivery partners.
“When we move people to digital ordering, we see an uplift in check in almost every case, whether it’s kiosk or online,” Gibbs said in the earnings call. “When we move people to things like Dragontail…for Pizza Hut, we know we get a four-minute savings on delivery time of pizzas, and we know we can get drivers up to deliver more orders per hour by using it.”
“There are use cases all over the place for how this improves unit economics for franchisees, which, ultimately, is the heart of our business,” Gibbs added. “The better their unit economics are, the more they build, the more they can afford to offer the right prices and value to customers and so on.”
Yum! Brands also owns leading fast-food brands like Taco Bell and KFC, and the May 1 earnings call focused largely on those chains. But in reference to Pizza Hut’s Q1 problem, Gibbs said, “Obviously the laps in the quarter were unusually large. We always intend to lap anything with positive sales. We didn’t do that at Pizza Hut U.S.”
He added, “But we are positive on a two-year basis, and we actually did see an acceleration of Pizza Hut’s two-year trends in Q1 versus Q4. I am excited about the calendar that Pizza Hut has for the balance of the year as well in the U.S.”
On the bright side, Pizza Hut increased its store count domestically and overseas in the last quarter. It added 15 stores in the U.S. and 61 in international markets, for a total of 19,942 locations—6,608 in the U.S. and 13,334 overseas.
