Pizza Hut has its first new owner since 1977. But can LongRange Capital rescue the once-mighty, now floundering pizza giant?
On September 2, Yum! Brands announced the completion of the sale of Pizza Hut U.S. to LongRange Capital for about $1.5 billion.
According to Yum! Brands, that figure is “subject to certain adjustments,” and Yum! could receive an additional $75 million by 2030 based on the brand’s future performance.
The sale frees Yum! Brands to focus on its other well-known brands, like Taco Bell and KFC, while Pizza Hut’s new owners work to turn around the chain’s fortunes without “the immediate pressures of public markets,” as Restaurant Dive puts it.
PepsiCo purchased Pizza Hut in 1977 and quickly spun it off, along with Taco Bell and KFC, into a separate company, originally called Tricon Global Restaurants. In 2002, the company was renamed Yum! Brands.
CEO Chris Turner said Yum! Brands “now moves forward as a more focused company with significant opportunities for growth around the world. Our unmatched digital capabilities and scale and our relentless focus on the future consumer, strengthening restaurant economics and leveraging Byte by Yum! will allow us to accelerate growth and deliver sustainable long-term value for our shareholders.”
That leaves LongRange Capital to pick up the pieces of a once-dominant brand that has had to shut down hundreds of unprofitable stores over the past two years.
But in a research note emailed to Restaurant Dive in late June, Peter Saleh, an analyst with global financial services firm BTIG, warned that the new owners face some daunting odds. Private ownership of Pizza Hut could lead to “a more drastic turnaround effort, but the track record of similar deals isn’t great,” Saleh said.
Saleh continued: “We’ve seen a succession of different leaders, turnaround efforts, closure activity and franchisee transfers at Pizza Hut over the last 20 years, and the brand is in roughly the same position and modestly smaller in the U.S. ($5.1 billion in system sales) than it was back then, so we struggle to identify something that hasn’t been tried already.”
Eduardo Luz, formerly the president and CEO of P.F. Chang’s, has been tapped as Pizza Hut’s interim CEO. Naturally, he sounded a more optimistic note on Pizza Hut’s prospects.
“As a standalone business, we are now fully focused on Pizza Hut’s guests, our franchisees and the teams who bring the brand to life every day,” Luz said in a press release. “With LongRange’s support and resources, we are well-positioned to invest in the brand and build on Pizza Hut’s legacy as we enter this next chapter.”
Bob Berlin, founder and managing partner of LongRange Capital, noted that Pizza Hut “has a storied legacy and global footprint that represents a significant opportunity. We are committed to supporting our franchisees and making the right investments to help Pizza Hut deliver consistently great food and experiences for guests around the world, while executing the operational and digital initiatives that will drive sustainable growth.”
