NPC International, Pizza Hut’s largest restaurant franchisee with more than 1,200 stores, has filed for Chapter 11 bankruptcy.
NPC, which also owns nearly 400 Wendy’s restaurants, blamed its financial woes partially on poor performance by its 1,200-plus Pizza Hut stores, which account for 20 percent of the chain’s U.S. locations. “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,” NPC stated in its filing in the Texas Southern Bankruptcy Court.
NPC also said it was spending about $750,000 a month on new safety measures to protect customers and employees from the coronavirus, as well as rising labor costs and the availability of ingredients.
“As our industry has been in the midst of dynamic changes due to shifting consumer preferences and dining behavior, we also have been facing increased labor and commodities costs and a higher level of financial leverage that presents obstacles to achieving our long-term business objectives,” said Jon Weber, CEO & president of NPC’s Pizza Hut division, in a statement. “These challenges have been magnified recently by the impact and uncertainty of COVID-19, and we believe it is necessary to take proactive steps to strengthen our capital structure so we have the financial flexibility to continue to adapt to current industry trends. We also intend to use this process to continue to evaluate and optimize our restaurant portfolio so that we are best positioned to meet the needs of consumers across the country.”
Carl Hauch, president and CEO of NPC’s Wendy’s division, said Wendy’s business “remains strong and resilient and is already recovering from the impact of the pandemic to produce year-over-year growth.”
NPC said its Pizza Hut and Wendy’s stores remain open. It has filed a motion “to continue providing wages, salaries and benefits to all NPC employees without change or interruption, and NPC does not expect there to be any changes to employees’ day-to-day job responsibilities or work schedules.”
NPC’s filing came on the heels of an announcement that pizza chain Chuck E. Cheese was filing for Chapter 11 protection as well.
According to CNN, Pizza Hut said its U.S. restaurants that have been open for at least a year have seen higher sales since March. In early May the company posted its highest delivery and carryout sales week in the past eight years. “In our delivery and carryout-only focused restaurants, quarter-to-date same-store sales growth was approximately 15 percent, reflecting strength in our off-premise business,” Pizza Hut reported at the time.
Yum Brands, Pizza Hut’s parent company, said in March that it had temporarily closed down more than 1,000 Pizza Hut Express units in the U.S. due to the pandemic.