Pizza Hut’s franchisee files for bankruptcy

NPC International, the nation’s largest Pizza Hut and Wendy’s franchisee, filed for bankruptcy on Wednesday.

A Pizza Hut spokesman said the bankruptcy should prove an opportunity to reduce NPC’s debt and make the business stronger. Picture: AAP

NPC International, the nation’s largest Pizza Hut and Wendy’s franchisee, filed for bankruptcy on Wednesday and will put its burger restaurants up for sale as it continues to hold discussions over the fate of its pizza outlets.

The company, which operates more than 1200 Pizza Hut locations and about 400 Wendy’s restaurants, had been struggling even before the coronavirus pandemic forced many of its eateries to close. The company nearly filed for chapter 11 this year before a group of lenders threw it a financial lifeline.

The company said the Pizza Hut chain had been a particular drag on NPC for years, amid steep competition from rivals and Pizza Hut parent, Yum Brands’, reluctance to invest in the chain, according to a filing in the US Bankruptcy Court in Houston.

“The Pizza Hut business has especially been hurt by a brand image and product offering that lags behind its competitors,” Eric Koza, NPC’s chief restructuring officer, said in court filings.

If all goes well in bankruptcy, NPC intends to reorganise around its Pizza Hut eateries and emerge from chapter 11 under new ownership.

NPC was in default on payments owed to the Pizza Hut parent when it filed for bankruptcy, court filings show. The franchisee has nearly $US900m ($1.3bn) in debt.

A Pizza Hut spokesman said the bankruptcy should prove an opportunity to reduce NPC’s debt and make the business stronger. NPC’s Pizza Hut locations were open, he added.

“We are working with NPC and its lenders to ensure that NPC’s Pizza Hut restaurants emerge from this process with the support they need to succeed.”

The COVID-19 pandemic affected Wendy’s and Pizza Hut outlets differently, Mr Koza said.

“After an initial sharp drop, the Pizza Hut business saw a substantial spike in pizza sales,” he said in a declaration filed with the court. “Conversely, the Wendy’s business saw initial decreases in sales as a result of dramatic decline in foot and drive-through traffic.”

Mr Koza said the reversal at the chains was likely to be short-lived as Wendy’s business bounces back with the reopening of local and state economies.

A Wendy’s spokeswoman said NPC’s locations performed well before the pandemic and they continued to generate sales in line with with US averages. The restaurants remain open and NPC is current with obligations.

“We expect that will continue, and we will stay closely co-ordinated and support them moving forward,” she said.

NPC plans to pursue a sale of some Pizza Hut units within three to four weeks if it doesn’t reach a deal with Yum and creditors.