Private equity firm Allegro Funds has sold the Australian Pizza Hut operations to US based Pizza Hut franchisee Flynn Restaurant Group for less than $100m.
Flynn is the largest restaurant franchise operator in the US with a portfolio of over 2,350 restaurants, including 926 Pizza Huts (one of the world’s largest Pizza Hut franchisees) as well as 441 Applebee’s, 379 Arby’s, 282 Taco Bells, 192 Wendy’s and 130 Panera Bakery Cafes.
It will now take on the master franchisee licence for Australia from Allegro, which is known to have been a keen seller of the business for some time.
Pizza Hut Australia includes nearly 260 restaurants and is the group’s first international expansion beyond its US network of franchisee operations.
Pizza Hut Australia has been run by Phil Reed, and he will continue to run the business that has delivered 51 consecutive months of same store sales growth.
Flynn Restaurant Group co-chief operating officer Ron Bellamy said Pizza Hut Australia represented the ideal opportunity for Flynn to expand internationally, while at the same time growing as a brand.
“Our immediate focus will be to work with the team to determine how we can best leverage our broader scale and capabilities to support the continued success trajectory of Pizza Hut in Australia.
“Over time, Flynn looks forward to expanding its global reach further with new concepts and markets,” said Mr Bellamy.
The acquisition has received Foreign Investment Review Board approval and is subject to consent by Pizza Hut global brand owner, Yum! Brands, and is expected to complete by the end of June 2023.
The sale came after Allegro was in exclusive talks to sell its Pizza Hut business to an offshore buyer in 2021, but the deal was dropped, sources say.
The private equity firm is understood to have approached prospective buyers about the business during 2022, working with Miles Advisory.
This is after deliveries for takeaways such as pizza soared amid the global pandemic in the past two years, particularly when lockdowns were in place.
Sources said last year that the business generated less than $15m of annual earnings before interest, tax, depreciation and amortisation, but earnings are understood to now be less than $15m.
Such companies in the industry typically sell for less than 10 times EBITDA.
One factor deterring some buyers in the previous efforts to offload Pizza Hut in 2021 was the anticipated hike in fees payable to US-based parent company franchisor Yum! Brands, which owns the KFC and Taco Bell brands.
It is understood that Flynn and Yum! have negotiated a new agreement as part of the sale.
Allegro purchased the master franchisee licence for Pizza Hut in Australia in 2016 with a local management buy-in team in what was its fourth investment by Allegro Fund II, which had $100m to invest.
It purchased the failed pizza chain Eagle Boys Pizza around the same time.
Pizza Hut has been a household name in Australia since the early 1970s.
It was one of the first pizza companies to do home deliveries in Australia.
It has 5.7 per cent of the pizza restaurant and takeaway market share in Australia, behind Domino’s Pizza with 27.4 per cent, according to IBISWorld.
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