By Danny Klein
The transition of Pizza Hut into a modern delivery brand really kicked into motion in 2019 following a $130 million transformation agenda. The challenge was no secret, executives said at the time. Pizza Hut’s footprint didn’t align with its operational investments or where the consumer was headed.
Essentially, Pizza Hut had to evolve its U.S. landscape toward more delivery and carryout (delco) restaurants and away from the “Red Roof” dine-in venues that once dotted markets nationwide. Yum! Brands knew this wouldn’t be a quick fix, originally outlining 24 months of volatility, noting to investors its store count could drop as low as 7,000 locations (it was 7,559 in Q2 2019). Roughly 6,100 of those at the time were “traditional” locations and 1,350 “Express.” But, importantly, close to half of the first pool were dine-in venues.
At that juncture, 90 percent of Pizza Hut’s business flowed off-premises. U.S. and international locations saw about seven and six point differentials between off-premises and dine-in, respectively (dine-in representing the lagged mix). Close to 90 percent of Pizza Huts being built were “delco” stores.
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In October 2018, the gap between dine-in sales and sales from delivery and carryout was significant, with both the U.S. and international seeing a roughly 10-point canyon.
And so, the issue was split, yet clear—while the vast majority of business flowed through delivery and carryout channels, close to half of its assets remained of the dine-in variety. Also, there were some locations built in trade areas that worked 30 or 40 years ago. Were they still viable for modern delivery models? It was worth noting as well: These delco Pizza Huts were smaller, more efficient designs with lower investment requirements—a vital point in such a heavily franchised system competing for operators with Domino’s, Papa Johns, Little Caesars and so on. A Domino’s costs about $425,000 to build.
Globally, Pizza Hut shuttered 1,745 restaurants in 2020 (it also opened 682) to end the fiscal year with 17,639 venues around the world—the lowest figure since Q3 2018.
At the end of Q1 2025, Pizza Hut had 6,474 U.S. restaurants (decline of 83 year-to-date) and 13,312 international units (flat year-to-date), for a total of 19,786—19,763 of which were franchised. There were 23 corporate stores in the U.S. So from that 2019 transformation outline until Q2 of this year, Pizza Hut’s stateside footprint slimmed 1,085 locations.
One of the cogs for Pizza Hut was to restructure its franchise base and identify overleveraged operators or partners who weren’t aligned. Executives in 2019 said the changes were “an enormous distraction” for operators, particular as Yum! transitioned franchisees out of the system and put stores in the hands of new players. Some were saddled with debt that made it difficult to relocate. More recently, incoming CEO Chris Turner—currently CFO—has referred to the ideal as “3C” franchisees (capable, capitalized and committed).
There have been a few events over the years: franchisee EYM Group went bankrupt after facing a lawsuit from the company over alleged agreement breaches, and sold 77 restaurants to six buyers (including Pizza Hut, which spent $720,000 to take on 18); Yum! cut ties with a 547-unit turkey franchisee, resulting int 254 Pizza Hut closures; Flynn Restaurant Group—the largest franchisee company in the world—took over the 260-unit Australia business in 2023; before the Australia acquisition, Flynn made the largest swing on the timeline in 2021 when it added 937 Pizza Hut and 194 Wendy’s stores from NPC International, a move that doubled the group’s restaurant count and ended a saga with bankrupt NPC.
Pizza Hut saw some success early in its transformational journey. In Q3 2021, Pizza Hut’s U.S. division posted 2 percent same-store sales growth, which was 8 percent higher on a two-year stack. And Pizza Hut’s off-premises channel was up 17 percent.
Naturally, it’s been a convoluted trail given COVID (the brand fulfilled north of 50 million contactless orders via delivery and carryout by the end of that March), and, of late, a category that’s facing as much competition as any in foodservice. That’s a twofront reality: one, pizza brands fight for share with aggregators for a digital, convenience-focused occasion, more so than other segment when you consider how the pool has thickened over the years; and secondly, pizza is often cited as the only sector where independents hold more share than the largest chain. According to Statista, in 2022, there were 44,644 independent pizza restaurants in the U.S., roughly 4,800 more than the previous year. Meanwhile, the number of U.S.-based pizza chain units counted 35,531.
It’s also been just over a year since Juan Carlos “Carl” Loredo was named president of Pizza Hut’s U.S. division, coming over from a global CMO role at Wendy’s. He replaced David Graves, who exited in May 2024 after joining the chain as chief brand officer in 2020. Graves helped guide the turnaround with former KFC executive Kevin Hochman and CMO George Felix, who have since turned Brinker International’s Chili’s into one of the industry’s top comeback stories.
Outgoing Yum! CEO David Gibbs, set to retire in October after 37 years at the company, said in Q1 Loredo had “big plans to grow the brand and accelerate expansion in the U.S.”
System sales declined 3 percent in the quarter, largely due to what Yum! called “disappointing same-store sales performance” in the U.S. (negative 5 percent, year-over-year, on top of a 6 percent drop in Q1 2024 for a two-year slide of 11 percent). Domestic sales were soft in January, as they were for most, but improved in February and March, with the final weeks of Q1 showing steady gains in both revenue and transactions, the company said.
Facing what Gibbs called an “intense competitive environment,” Pizza Hut leaned into value and group occasion offerings such as Stuffed Crust and Wings promotions and the Ultimate Hut Bundle, which helped lift check averages and bring in new customers. The Ultimate Hut Bundle also powered Pizza Hut’s highest digital sales per restaurant during the Super Bowl.
Going forward, Yum! said Pizza Hut would prioritize a “3D” strategy: distinctive offerings for group occasions, dependable value platforms like the $7 Deal Lover’s Menu and disruptive innovation to gain share.
Outside the U.S., Pizza Hut delivered even same-store sales, lapping a negative 8 percent figure in Q1 2024, with strength across Asia, Europe and the Middle East.
And speaking on evolution, Q1 operating profit growth was negatively impacted by 7 percentage points, or roughly $6 million, due to expenses associated with transitioning stores from four franchise entities to new ownership, as well as 3 percentage points owing to the timing of technology spending within franchise spending and other service expenses.
Broadly, the brand is still recalibrating. As it shared in Q4 2024, Pizza Hut accelerated planned closures or engaged with franchise partners to strengthen the system, particularly in markets such as the U.S., U.K., and Chile. In the U.S. and U.K., Yum! facilitated a transfer of more than 200 stores to “more capable franchise partners,” Gibbs said in April.
Into more recent results
Pizza Hut’s latest FDD shows the divergence. Talking on investments, the funds needed to start a new restaurant range from $777,000–$2.053.5 million for a “restaurant-based delivery restaurant” or “delivery-based restaurant” to $624,000–$1.278.5 million for a “fast casual delco restaurant” to $647,000–$1.205.3 million for a freestanding “delco” delivery/carryout unit to $462,000–$791,300 for an in-line/endcap delco delivery/carryout store.
Each case excludes real property cost and comprises a $25,000 fee paid to Yum! and its affiliates.
There’s also Pizza Hut’s non-traditional side, where an operator can fork up $50,800–$183,000 for a “Pizza Hut Mini Kitchen;” $78,300–$179,000 for a Pizza Hut kiosk; $105,700–$224,000 for a Pizza Hut Retail Counter; and $131,200–$304,000 for a Pizza Hut Retail Counter with dining). These stores don’t include property or signage and run $5,000–$20,000 on the upfront fee side.
Pizza Hut’s U.S. business (FDD definition versus investor report) retracted 70 stores to 5,237 on the traditional angle. That was a step-up in closures from 16 last year and growth of six in 2022. The 2024 result included expansion of 16 company-run locations alongside the retraction of 86 franchised venues. A year earlier, Pizza Hut slimmed its corporate and franchised base by 14 and two stores, respectively.
The largest Pizza Hut franchised market in the U.S., by far, was Texas in 2024 at 719 restaurants (down one, year-over-year).
Pizza Hut opened 89 stores and ceased operations of 175 last year. The openings slowed from 155 in 2023 (157 ceased operations) and 144 the year prior (137 ceased).
That growth should continue to taper in 2025. Pizza Hut projected 81 franchised openings for the coming fiscal year—the most of which are slated for New York (14). No other market is in the double-digits. Zero company stores are expected to open.
Getting into performance, there are layers here, too.
Pizza Hut noted on its FDD it no longer generally offers franchises for Red Roof restaurants. The concept, the company said, is “now retired” and no longer operative except with respect to existing Red Roof restaurants previously franchised and subject to franchisee renewal or transfer activity to the extent permitted by the subject Pizza Hut Franchise Agreement governing such “Red Roof” restaurants.
The RBD store represents Pizza Hut’s traditional dine-in format with delivery added. The DBR (delivery-based restaurants) and fast casual delcos are newer formats, with back-of-house operations designed for delivery and carryout, but also with limited seating for dine-in. The DBR is a large-format, dine-in, delivery, and carryout store with more than 50 seats (it can be freestanding, end-cap, or in-line with approval. Pizza Hut’s fast casual delco is a small-format, delivery and carryout restaurant with fewer than 50 seats. All new franchises incorporate the WingStreet product line.
On Pizza Hut’s FDD, “mature franchised system restaurants” of the dine-in/Red Roof and RBD (restaurant-based delivery) concept type counted 2,007 stores as of December 30, 2024. It was 1,983 a year earlier.
Excluded from this group are DBR, fast casual delcos, carryout-only system stores, seasonal system Pizza Huts, Express restaurants, and any type of restaurant that operated for 24 or fewer days in each financial period, including those temporarily closed for extended periods for remodeling, maintenance, and otherwise. So, of the entire 5,214 number, 5,059 fit being “mature,” or open for at least a year at the end date of the reporting periods/not closed for a stretch.
These 2,007 locations averaged gross sales of $1.088.360 million and median gross sales of $1.027.406 million. In 2023, it was $1.065.167 million and $1.005.410, respectively.
Average gross sales ranged from $263,921 to $3.111.502 million. A total of 860 (42.9 percent) exceeded the average.
The 2023 figures were similar: sales scaled from $266,559 to $3.153.860 million and 42.8 percent beat the average.
For delco delivery/carryout restaurant concepts, there were 3,052 counted, up from 2,852 last year (showing the continued elevation of this approach). Average gross sales clocked $983,165 and median gross sales of $936,719. That measured to 2023’s figures of $981,015 and $940,668.
The range for this group was $258,098 to $2.871.378 million. A total of 1,357 stores (44.5 percent) eclipsed the average.
In 2023, sales stretched from $187,239 to $2.638.739 million. Just under 45 percent topped the average.
All across, Pizza Hut’s 5,059 included restaurants (a lift from 4,835 tallied in 2023) averaged gross sales of $1.024.898 million and median gross sales of $969,232. The numbers closely resembled 2023’s stats of $1.015.529 million and $964,911, respectively.
The broader range was $258,098 to $3.111.502 million, with 43.6 percent beating the average.
Pizza Hut’s 2024 system average-unit volume, according to QSR 50 data (full released in August), which covers all 6,557 U.S. restaurants, was $839,000. Domino’s was $1.354 million; Papa Johns $1.157 million; Little Caesars (QSR estimate) $900,000; and Marco’s $932,000.
Since 1989, Pizza Hut has granted licenses to third parties to sell pizza from kiosks, concession stands and other non-traditional facilities. The company does not directly operate any non-trade sites, but affiliates in the past have (primarily concession stands).
Pizza Hut files a sperate FDD for non-trad. That side of the brand expanded by 15 units in 2024 to reach 1,332 locations. It grew by 32 in 2023 after retracting by 12 the prior year. As noted, all of them are licensed. Last year’s development included 51 openings, eight non-renewals, and 28 locations ceasing operations for other reasons. Both the openings (51 versus 109, and ceased operations, 28 compared to 58) fell year-over-year.
Pizza Hut has sizable growth expectations—not inclusive of closures—for non-trad in 2025, expecting 260 openings, including 66 in Texas, 37 in Georgia, and 29 in Alabama.
Total revenues (in thousands) of $529,591 marked a decline from $534,173 in 2023 and $534,667 in 2022. Net income (also in thousands) was $226,784 a year after $231,843 and $220,888 in 2022.
Danny Klein is VP, editorial director of WTWH Media’s Food, Retail and Hospitality Group. Klein typically contributes to QSR and FSR magazines, sister publications of PMQ Pizza. WTWH Media is the parent company of PMQ Pizza. This story originally appeared on QSRmagazine.com.
