Pizza Hut, the long-running popular chain of pizza restaurants, has been struggling to make a profit for years now. And its parent company, Yum Brands, is finally selling the chain for $2.7 billion.
In February, the parent company, Yum Brands, announced it was looking to sell Pizza Hut, which had revealed plans to close 250 restaurants across the US. The onion chain is struggling against aging outlets and market saturation.
Pizza Hut was founded in Wichita, Kansas in 1958. PepsiCo bought the brand in 1977 before selling off its restaurants division in 1997, which later became Yum Brands.
The Deal: New Owner of Pizza Hut
The deal is actually a double whammy. Pizza Hut, minus the mainland China business, is being sold to LongRange Capital, a private equity firm, for roughly $1.5 billion. The mainland China Pizza Hut is headed to Yum China Holdings Inc.'s hands at roughly $1.2 billion.
All together, that works out to $2.7 billion. Both transactions are planned to close by this year's third quarter.
Yum Brands chief executive Chris Turner sounded upbeat about the move. He said that under LongRange and Yum China, Pizza Hut will be in a good position to grow from ownership with deep restaurant industry expertise.
Why Did Yum Brands Walk Away?
It didn't happen overnight. Yum Brands began a strategic review to evaluate Pizza Hut options in November, amid the chain's struggling sales at comparable restaurants. The threat of sale had been looming for months.
Industry observers weren't surprised. Neil Saunders, managing director of GlobalData, told me: "Pizza Hut has long been the weak link in Yum's portfolio." Even with attempts to turn the brand around and close low performers, it's become ever more clear that getting the division growing again would take an investment and a level of patience that Yum is just not ready to give up.
In short, Yum Brands didn't want to keep injecting money into a brand that wasn't growing. By selling Pizza Hut, it can now refocus on its higher-selling brands. Those include KFC, and Taco Bell, which has had far more success in recent years.
So What's Next for Pizza Hut?
The real question is whether new owners can do what Yum Brands could not. Pizza Hut still has a massive global presence, and the brand name carries real weight with older customers. But it has lost ground to newer pizza chains and delivery-focused competitors who have spent years building slicker, faster, cheaper options.
LongRange Capital is a private equity firm, which means it will likely look at cutting costs, closing weak stores, and rebuilding the brand from the ground up. Whether that works or not, only time will tell. For now, your local Pizza Hut is still open and serving. But the chain’s future looks very different from what it was even five years ago.