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 2020 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 2020 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 2017, 2018, and 2019, based on Item 20 of the company’s 2020 FDD
- Section V – Presentation and analysis of Pizza Hut’s financial performance representations, based on Item 19 of the company’s 2020 FDD, including information on the:
- 2019 average, median, highest, and lowest gross sales; average cost of sales; and average cost of labor for the 21 company-owned Pizza Hut restaurants that were open and operating for at least one year as of December 31, 2019 and that were situated on leased real property
- 2019 average, median, highest, and lowest gross sales for the 2,751 franchised Pizza Hut restaurants of the Dine-In/Red Roof and RBD restaurant concept type that were open and operating for at least one year as of December 31, 2019
- 2019 average, median, highest, and lowest gross sales for the 2,914 franchised Pizza Hut restaurants of the Delco Delivery/Carry-Out restaurant concept type that were open and operating for at least one year as of December 31, 2019
- 2019 average, median, highest, and lowest gross sales for the 5,665 franchised Pizza Hut restaurants that were open and operating for at least one year as of December 31, 2019
Section I – Background Information
21 Things You Need to Know About the Pizza Hut Franchise
Expands Team to Serve America Through Contactless Delivery, Carryout, and Curbside Pickup
1. In late March 2020, as the COVID-19 virus hit the U.S. and shut down much of the country, Pizza Hut announced that it was committed to doing its part to feed families and those looking for safe, fast, and reliable food from brands they can trust. Pizza Hut said it was hiring and putting new procedures in place – and doubling down on others – to meet the changing demands of customers during this critical time.
2. With an increased focus on the safety of both customers and employees, Pizza Hut is now offering Contactless Delivery nationwide. No matter the location, for customers wanting a more contactless option that prefer their pizza left at the door upon delivery, no problem. Ordering is simple:
- At checkout, the customer clicks on Delivery Instructions and writes in how they’d like their food delivered. For example: “Contactless Front Door”;
- Customers can prepay and tip using any credit or debit card;
- The delivery driver will notify the customer once the food has been dropped off.
3. Other precautionary measures the company is taking with a focus on keeping the families and communities it serves safe include:
- Getting customers their food on their terms via:
- (1) Contactless Delivery, for customers who want the convenience of delivery, but with social distance in mind;
- (2) Curbside Pickup (where possible), for customers who don’t want to leave their car, but want to avoid the additional cost of delivery; and
- (3) Contactless Carryout, for customers looking to get their pizza hot out of the oven, but with a contactless experience.
- Doubling down on industry-leading and longstanding sanitization and handwashing procedures;
- Ensuring a hands-free experience – once the pizza leaves Pizza Hut’s 400+ degree oven, it slides hands-free into the box and straight to your home.
4. Pizza Hut and its franchisees are hiring, with more than 30,000 open positions available nationwide (at the time of the announcement). Most importantly, these are permanent positions. Available jobs include cooks, shift leaders, restaurant managers, and virtual call center agents. Pizza Hut is also hiring more drivers to meet an increased delivery demand as more customers order to eat at home.
5. Pizza Hut is also expediting its hiring and onboarding process to accommodate people who are looking for jobs now, and to get delivery drivers on the road more rapidly, and ultimately to get customers their pizza quicker. The new process aims to have delivery drivers trained and on the road safely in five hours, which is nearly 3x quicker than the previous training procedure.
6. Kevin Hochman, president of Pizza Hut U.S., said, “Given the increased demand we’re seeing for delivery, we’re hiring new team members to help us feed America. Whether through contactless delivery, curbside pickup, or carryout, we’re here to serve oven-hot pizza however customers want to get it. Based on families eating more together, we’re also seeing big demand for our new Big Dipper Pizza that is nearly 2 feet of pizza and has over 24 slices, so we’ll be extending the availability of that product, too.”
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7. As the country continues to navigate uncertain times, Pizza Hut is committed to providing helpful resources – and, of course, pizza – to the communities it serves:
- Serving Front Line Workers: Pizza Hut franchisees across the country are doing their part to serve the community with pizza drops to essential personnel, healthcare workers, and those experiencing food insecurity;
- Food Donation: With the support of longtime food recovery partner, Food Donation Connection (FDC), Pizza Hut is donating food from participating restaurants to those in need;
- Books: In partnership with its literacy nonprofit partner, First Book, Pizza Hut is helping send books to communities in need – 55,000+ so far since March 16th;
- Educational Resources: Pizza Hut is also providing free educational materials and resources for parents through its BOOK IT! Program.
Appoints First-Ever Chief Equity Officer
8. In mid-August 2020, Pizza Hut announced the appointment of Chequan Lewis as its first chief equity officer – a critical first step in delivering on the company’s commitment to advance equity and create meaningful change. In his new role, Lewis will join the Pizza Hut U.S. leadership team to help shape Pizza Hut as a resilient business for the 21st century – putting in place structures, processes, and decision-making that create a more equitable workplace and company for the employees, franchisees, licensees, restaurant teams, customers, and communities the brand serves.
9. Lewis said, “I am excited to lead this critical work during this moment in our brand’s and nation’s history. Pizza Hut occupies a unique space in our cultural landscape, and I believe we can help make our world a more vibrant place by chasing equity with intentionality, authenticity, and humility. I look forward to the progress we can make and lives we change as we work hand-in-hand with our franchisees, team members, and community partners towards this vision.”
10. Lewis joined Pizza Hut four years ago as a director on the Pizza Hut legal team, and most recently led the Pizza Hut Express division as a senior director. Prior to joining Pizza Hut, Lewis was a legal associate with Baker Botts, LLP, clerked for the U.S. Department of Justice, and led national employment and diversity recruiting efforts for McMaster-Carr Supply Company. He graduated from Howard University and Harvard Law School.
Donates 250,000 Personal Pan Pizzas and Distributes $500,000 to Educators to Provide Meals and Books for Students in Need
11. In mid-April 2020, Pizza Hut announced the Read & Feed Program, where the brand will donate 250,000 Personal Pan Pizzas and make $500,000 in grants to educators through its nonprofit partner, First Book. This announcement came as COVID-19 closed school doors across the country, denying thousands of children access to meal services, internet, books, and more.
12. With these grants from Pizza Hut, First Book and First Book-eligible BOOK IT! educators will be able to order books or other educational resources and distribute them to students where essential services are received (including emergency feeding sites, approved grab-and-go food programs at schools, public housing authorities, or other essential social service sites).
13. Additionally, starting around April 22, every order from First Book (up to 10,000) will arrive to educators with 25 Pizza Hut Personal Pan Pizza certificates. Pizza Hut is providing these certificates so that educators can distribute them to their students.
14. With little clarity on when students will return to school, these essential efforts are needed now more than ever. First Book recently surveyed its educator network and found that more than two-thirds indicated a high need for books to supplement distance learning, keep kids engaged, and prevent them from falling behind while out of the classroom.
15. Furthermore, a 2019 report from the Federal Communications Commission showed that 21 million Americans did not have access to at-home broadband. As reliance on at-home learning increases amidst continued school closures, students who lack access to the internet or books in their homes are unable to participate, putting them at a significant disadvantage that will persist after the COVID-19 crisis has resolved.
16. The Read & Feed Program is the latest literacy-based initiative from Pizza Hut, which has built a legacy of nurturing a love of reading through its BOOK IT! Program. Since 1984, the BOOK IT! Program has been dedicated to encouraging reading in schools nationwide. BOOK IT! is the largest and longest-running corporate supported reading program and has inspired 1-in-5 Americans along the way.
17. In 2016, Pizza Hut expanded its commitment to literacy when it launched Pizza Hut: The Literacy Project, a global commitment to impact 100 million lives by enabling access to books and educational resources, empowering teachers, and inspiring readers. To achieve this, Pizza Hut raises money on behalf of its nonprofit partner First Book, who provides grants to teachers to purchase books and educational resources for their students and classrooms.
18. Pizza Hut was founded in 1958 by Dan and Frank Carney in Wichita, Kansas. The Carney brothers, who were Wichita State University students at the time, borrowed $600 from their mother to open their own pizza place. Pizza restaurants weren’t that common in Kansas back then, which made Pizza Hut an early success. A year after opening the first location, the Carneys started franchising the Pizza Hut concept.
19. Over the next few years, Pizza Hut continued to grow and in 1963, the brand’s iconic building style was designed by Chicago architect George Lindstrom and implemented in 1969. Pizza Hut’s domestic and international growth continued and the brand expanded its menu to include Pan Pizza, Hand Tossed Traditional, and Stuffed Crust.
20. In 1977, PepsiCo acquired Pizza Hut. Two decades later, PepsiCo’s fast food division – consisting of Pizza Hut, KFC, and Taco Bell – was spun off and became part of a new company named Tricon Global Restaurants, Inc. In 2002, Tricon changed its name to Yum! Brands and still maintains ownership of Pizza Hut. Today, Pizza Hut has grown into the largest pizza chain in the world in terms of locations.
Entrepreneur’s Franchise 500
21. Pizza Hut ranked No. 10 on Entrepreneur’s 2020 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 2020 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 2020 FDD.
Section IV – Number of Franchised and Company-Owned Outlets
- Outlets at the Start of the Year: 5,923
- Outlets at the End of the Year: 6,059
- Net Change: +136
- Outlets at the Start of the Year: 6,059
- Outlets at the End of the Year: 6,124
- Net Change: +65
- Outlets at the Start of the Year: 6,124
- Outlets at the End of the Year: 5,953
- Net Change: -171
- Outlets at the Start of the Year: 319
- Outlets at the End of the Year: 96
- Net Change: -223
- Outlets at the Start of the Year: 96
- Outlets at the End of the Year: 24
- Net Change: -72
- Outlets at the Start of the Year: 24
- Outlets at the End of the Year: 23
- Net Change: -1
Section V – Financial Performance Representations (Item 19, 2020 FDD) and Analysis
- Set forth below are historical data for certain domestic traditional Pizza Hut outlets owned and operated by Pizza Hut 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 RBD and Delco System Restaurants that were open and operating for at least one year as of December 31, 2019 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.
- Specifically excluded from Mature Company-Owned System Restaurants are System Restaurants for which PHLLC or its affiliates owned the real property; carry-out only System Restaurants; seasonal System Restaurants; Express Restaurants (for which licenses are offered under a separate disclosure document); or any type of System Restaurant other than traditional RBD and Delco System Restaurants.
- As of December 31, 2019, there were 21 Mature Company-Owned System Restaurants, which are reflected in the subset information provided below. No Company-Owned System Restaurants closed in 2019.
2019 Average Performance – Mature Company-Owned System Restaurants
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