In this FDD Talk post, you’ll learn the following:
- Section I – Background information on the Pizza Hut franchise opportunity, including relevant news updates
- Section II – Estimated initial investment for a Pizza Hut franchise, based on Item 7 of the company’s 2018 FDD
- Section III – Initial franchise fee, royalty fee, marketing fee, and other fees for a Pizza Hut franchise, based on Items 5 and 6 of the company’s 2018 FDD
- Section IV – Number of franchised and company-owned Pizza Hut outlets at the start of the year and the end of the year for 2015, 2016, and 2017, based on Item 20 of the company’s 2018 FDD
- Section V – Presentation and analysis of Pizza Hut’s financial performance representations, based on Item 19 of the company’s 2018 FDD, including information on the:
- 2017 average gross sales, cost of sales, cost of labor, cost of advertising, semi-variable costs, other semi-variable costs, other fixed costs, rent, and EBITDA for the 18 mature company-owned system restaurants of the Dine-In, RBD, and DBR restaurant concept type
- 2017 average gross sales, cost of sales, cost of labor, cost of advertising, semi-variable costs, other semi-variable costs, other fixed costs, rent, and EBITDA for the 122 mature company-owned system restaurants of the Delco and FCD Delivery/Carry-out restaurant concept type
- 2017 average, low, high, and median gross sales for the 2,056 mature franchised system restaurants of the Dine-In/Red Roof and RBD restaurant concept type
- 2017 average, low, high, and median gross sales for the 2,229 mature franchised system restaurants of the Delco Delivery/Carry-out restaurant concept type
Section I – Background Information
19 Things You Need to Know About the Pizza Hut Franchise
Announces New Official Sponsorship of the NFL
1. At the end of February 2018, Pizza Hut announced that it was now the Official Pizza Sponsor of the NFL. The multi-year agreement will offer Pizza Hut a vast array of exclusive marketing rights, benefits, and designations that will unmistakably connect the brand with the NFL and its teams, players, events, partners, properties, and the many NFL experiences that capture the passion of consumers and football fans from all over the world.
2. NFL Commissioner Roger Goodell said, “We know many of our fans enjoy pizza while watching NFL games and we are thrilled to have Pizza Hut, an industry leader and one of America’s favorite brands, as an official league sponsor. With a focus on family, friends and fun, Pizza Hut has the creativity we are looking for in a partner and we look forward to working together with them to make the at-home NFL experience more exciting than ever for our fans.”
3. Pizza Hut has a long-standing tradition of connecting with football fans via promotions and experiences but this partnership will bring more scale and grandeur to the relationship between the company and fans. The NFL partnership will first unfold for Pizza Hut during the 2018 NFL Draft to be held near Pizza Hut’s global headquarters in North Dallas.
4. The partnership will allow Pizza Hut to use all 32 NFL team marks. The NFL will also be working closely with Pizza Hut to facilitate local, exclusive team partnerships. Pizza Hut will have the opportunity to leverage game tickets and unique fan experiences to all NFL games in marketing and promotional campaigns throughout each year.
5. Artie Starrs, president of Pizza Hut U.S., said, “Pizza Hut has a history of bringing more entertaining food and experiences to the pizza occasion and we plan to continue that through our exclusive partnership with the NFL. NFL stadiums are packed every week but tens of millions of fans are also watching the game at home. We have an unmatched ability to bring those fans closer to the sport thanks to the power of our 7,500 restaurants and 150,000 football-crazed team members. The capacity for what’s possible is endless and that’s going to make this league partnership great fun for Pizza Hut, the NFL and everyone who loves pizza and football.”
Committed to Serve Chicken Raised Free of Antibiotics by 2022
6. Around the beginning of June 2018, Pizza Hut announced its commitment to serve chicken raised free of antibiotics important to human medicine (per World Health Organization) by 2022. The commitment applies to all of the brand’s chicken, including the company’s WingStreet wings, and comes about a year after Pizza Hut completed the removal of of antibiotics important to human medicine from its chicken for pizza.
7. Pizza Hut is the first national pizza company to commit to an antibiotic policy for chicken wings. Marianne Radley, chief brand officer of Pizza Hut, said, “We are dedicated to listening to our customers and to serving better food. Today’s announcement to no longer serve chicken raised with antibiotics by 2022 demonstrates our commitment to serve food that not only tastes great, but that customers can feel good about eating. Our customers are our business, and we will continue to push ourselves to ensure that we are delivering the quality food and quality experience our customers expect and deserve.”
8. In addition to the removal of antibiotics important to human medicine from its chicken, Pizza Hut previously announced its commitment to eliminate BHA/BHT from all meats in the summer of 2016 and the use of artificial preservatives from cheese in 2017. In 2015, Pizza Hut became the first national pizza restaurant to remove artificial flavors and colors from its core pizzas. On top of these other commitments, Pizza Hut has already eliminated partially hydrogenated oils (also known as artificial trans fats) and MSG.
9. Over the past six years, Pizza Hut has removed three million pounds of salt from its ingredients. Additionally, Pizza Hut does not use any fillers in its meat toppings. Its Italian sausage is all natural and sourced from U.S. farmers, and its meatballs are free of any artificial colors, flavors, or preservatives. Pizza Hut also does not add any sugar or oil to its pizza marinara sauce, and its cheese is made from 100 percent whole milk mozzarella.
10. According to Radley, “The Pizza Hut culinary team has done a terrific job of listening to the voice of the customer, and has worked tirelessly to mind emerging health trends while not impacting the great taste that makes our food so special.”
Celebrates 60th Anniversary with Special Double Cheesy Crust Pan Pizza
11. To celebrate its 60th birthday, Pizza Hut introduced a new pizza that combines two of the brand’s most iconic menu items into one great new innovation called Double Cheesy Crust Pan Pizza. At the end of April 2018, Pizza Hut launched the new, limited-time pizza which pays homage to Stuffed Crust and Original Pan by baking a ring of cheese just inside the golden edge of Pizza Hut Pan crust. An additional layer of toasted parmesan is baked on the crust edge and the pizza is topped off with a blend of parmesan and oregano.
12. Zipporah Allen, chief marketing officer of Pizza Hut, said, “In addition to winning over pizza fans with innovations like the Double Cheesy Crust Pan Pizza, Pizza Hut has also become part of the fabric of American pop culture. Whether it’s making an appearance in iconic movies or changing the way we order food by being the first pizza ordered online, Pizza Hut has proven time and time again that No One Out Pizzas the Hut.”
13. Pizza Hut was founded in 1958 by two brothers, Dan and Frank Carney, in Wichita, Kansas. The brothers borrowed $600 from their mom to open a pizza parlor, which was uncommon at the time. They bought secondhand equipment and furnishings to fill a small building, which inspired the Carneys to name their new business “Pizza Hut.” This first location was so successful that the Carneys started franchising in 1959; Dick Hassur opened the first Pizza Hut franchise later that year in Topeka, Kansas.
14. In the early 1960s, Pizza Hut grew rapidly through the aggressive marketing of the pizza restaurant concept. By the end of the decade, Pizza Hut had hundreds of locations, including its first international location in Canada; and a home office in Wichita. The brand’s iconic red roof debuted in 1969.
15. Expansion continued throughout the 1970s with Pizza Hut’s 1,000th store opening early in the decade. Pizza Hut also became the number one pizza restaurant chain in the world in both sales and number of restaurants. As Pizza Hut’s growth continued, the company’s shareholders approved a takeover by PepsiCo and the two brands merged in 1977.
16. Due to Pizza Hut’s success, other pizza chain competitors entered the market in the 1980s. To help the brand stay ahead of the competition, Pizza Hut introduced new products including its famous Original Pan Pizza in 1980, the Personal Pan Pizza in 1983, and Hand-Tossed Traditional Pizza in 1988.
17. Pizza Hut’s strong growth continued into the 1990s and another iconic product, Stuffed Crust Pizza, was added to the menu in 1994. That same year, Pizza Hut became the first national chain to offer pizza delivery ordering through the Internet. During the late 1990s, PepsiCo decided to spin off its restaurant division, which owned Pizza Hut, KFC, and Taco Bell, and created an independent publicly-traded company called Tricon Global Restaurants, Inc.
18. After the acquisition of Long John Silvers and A&W, the company changed its name to Yum! Brands, Inc. in 2002. A year later, Pizza Hut added wings to its menu. Since then, Pizza Hut has become one of the largest pizza chains in the world.
Entrepreneur’s Franchise 500
19. Pizza Hut ranked No. 39 on Entrepreneur’s 2018 Franchise 500 list.
Section II – Estimated Costs
- Please click here for detailed estimates of Pizza Hut franchise costs, based on Item 7 of the company’s 2018 FDD.
Section III – Initial Franchise Fee, Royalty Fee, Marketing Fee, and Other Fees
- Please click here for detailed information on Pizza Hut’s initial franchise fee, royalty fee, marketing fee, and other fees, based on Items 5 and 6 of the company’s 2018 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 5,826
- Outlets at the End of the Year: 5,780
- Net Change: -46
- Outlets at the Start of the Year: 5,780
- Outlets at the End of the Year: 5,885
- Net Change: +105
- Outlets at the Start of the Year: 5,885
- Outlets at the End of the Year: 6,021
- Net Change: +136
- Outlets at the Start of the Year: 530
- Outlets at the End of the Year: 514
- Net Change: -16
- Outlets at the Start of the Year: 514
- Outlets at the End of the Year: 319
- Net Change: -195
- Outlets at the Start of the Year: 319
- Outlets at the End of the Year: 96
- Net Change: -223
Section V – Financial Performance Representations (Item 19, 2018 FDD) and Analysis
- Set forth below are historical data for certain domestic traditional Pizza Hut outlets owned and operated by PHLLC or its affiliates (“Company-Owned System Restaurants”) and certain domestic traditional Pizza Hut outlets owned and operated by franchisees (“Franchised System Restaurants”).
Part 1 – Mature Company-Owned Restaurants
- The financial performance representations below provide certain information regarding Company-Owned System Restaurants — of the RBD, Delco, DBR, and FCD Restaurant Concept type — that were open and operating for at least one year as of December 31, 2017 and that were situated on leased real property (“Mature Company-Owned System Restaurants”).
- RBD stands for Restaurant-Based Delivery System Restaurants from which Pizza Hut pizza and other products approved by PHLLC (“Approved Products”) are sold for dine-in and carry-out consumption, and may be delivered for off-premises consumption.
- Delco stands for Delivery/Carry-out System Restaurants from which Approved Products are sold for carry-out and are delivered, all for off-premises consumption.
- DBR and FCD stand for Delivery-Based Restaurant and Fast-Casual Delco System Restaurants, respectively, from which Approved Products are sold for dine-in and carry-out consumption, and are delivered for off-premises consumption.
- Specifically excluded from the definition of Mature Company-Owned System Restaurants are those System Restaurants for which PHLLC or its affiliates owned the real property; carry-out only System Restaurants; seasonal System Restaurants; Express Restaurants (for which franchises are offered under a separate disclosure document); or any type of System Restaurant other than traditional RBD, Delco, DBR, and FCD System Restaurants.
- As of December 31, 2017, although there were a total of 96 Company-Owned System Restaurants, the subset information provided below is based on 140 Mature Company-Owned System Restaurants (including certain System Restaurants that were transferred to franchisee ownership approximately two weeks prior to the 2017 fiscal year end).
A. 2017 Average Performance – Mature Company-Owned System Restaurants of the Dine-In, RBD, and DBR Restaurant Concept Type