Pizza Hut’s new owner Flynn Restaurant Group has big plans to topple Domino’s

US chain Flynn Restaurant Group is prepared to step up its investment in Pizza Hut’s Australian arm, backing local boss Phil Reed in his challenge to market leader Domino’s.

US chain Flynn Restaurant Group is prepared to step up its investment in Pizza Hut’s Australian arm, backing local chief executive Phil Reed in his challenge to market leader Domino’s.

“We think (Reed and Pizza Hut Australia’s management) are already doing a great job and we think they are capable of more,” said Flynn’s co-chief operating officer, Ron Bellamy, from the company’s offices in Cleveland, Ohio.

“Hopefully, we can bring some investment and maybe some expertise from our experiences in the US.”

Pizza Hut Australia’s purchase by Flynn, the largest restaurant franchise operator in the US, from private equity group Allegro is due to be finalised at the end of July.

While no figure was released, it is thought the price for buying the Pizza Hut franchise was less than $100m.

The US company has a portfolio of 2350 restaurants, including 926 Pizza Huts, 282 Taco Bells and 192 Wendy’s.

Under the leadership of Mr Reed, Pizza Hut Australia’s market share has gone from around 7 per cent when he took over in April 2018 to around 10 per cent.  Mr Reed has vowed that Pizza Hut wants to “get back to number one” in the local market with an aggressive strategy of doubling its store footprint over the next five years, challenging market leader Domino’s.

Pizza Hut opened 17 new stores in Australia last year and another six this year, the latest being in Wagga, taking its total store numbers to around 260. ASX-listed Domino’s dominates the market with around 755 stores.

In the US Flynn Restaurant Group has a portfolio of 2350 restaurants, including 926 Pizza Huts, 282 Taco Bells and 192 Wendy’s. Picture: Bloomberg

Mr Reed has declared his goal of increasing turnover from around $300m to more than $1bn in the next few years, declaring that there were as many as 500 “trading zones” across the country that could potentially host more Pizza Hut outlets.

“We have around 55 per cent of the Australian public who have yet to enjoy the opportunity of having Pizza Hut pizzas delivered to their home,” he said.

“There is a huge opportunity, whether it is growing the brand or opening new stores.”

Pizza Hut has reported 52 consecutive months of same store sales growth, recently running at 14 per cent last year in terms of value and 10 per cent in transactions.

Pizza Hut reported its biggest ever trading day in Australia on June 21, as viewers ordered pizzas as they watched the second State of Origin rugby league clash between NSW and Queensland, turning over more than $1.3m on the day.

Mr Bellamy said the Flynn group was prepared to back its expansion with more capital.

“Capital is absolutely a component of what we think we can bring to bear to support Phil and the team right now,” he said.

There were franchisees who wanted to take on new Pizza Hut businesses and Flynn was prepared to back the opening of new company-owned stores.

“Are we open to building new stores ourselves? We are absolutely open to it, and we’ll figure out the right balance (between franchise stores and company owned stores),” Mr Bellamy said.

Pizza Hut Australia chief executive Phil Reed. Picture: Arsineh Houspian

He also said Flynn could look at more investment in Australia.

“If you ask me if we think there’s an opportunity to participate more broadly in Australia with the quick service food business, I think the opportunity exists,” Mr Bellamy said.

“That’s something we will consider when the time is right.

“But, first and foremost, our focus is on Pizza Hut and supporting the remarkable journey that the team and the brand have been on in the Australian market.”

The Pizza Hut Australia deal is Flynn’s first move out of the US market.

Mr Bellamy said Flynn had been looking for the right opportunity to expand offshore for a while. Pizza Hut’s Australian business fit its criteria as it was a brand which Flynn knew well, a country where it felt comfortable operating, and a business with a strong existing management team.

He also said there were opportunities for Pizza Hut Australia to do more with its existing stores.

“There’s lots we can do in terms of continuing to work through the menu, try new things and bring in new products,” Mr Bellamy said.

This could include also stepping up its marketing budget.

“As the business continues to grow and there are more marketing dollars at play, it becomes a question of how to use it to create a flywheel effect where you have more to spend on marketing, and more to spend on the business.”

Originally published as Pizza Hut’s new owner Flynn Restaurant Group has big plans to topple Domino’s