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Pizza Hut, franchisee NPC ink deals for 97 units

OVERLAND PARK Kan. NPC International Inc., the largest Pizza Hut franchisee, said Thursday it agreed to another two purchase and sale agreements with franchisor Pizza Hut Inc. covering 97 restaurants and totaling $37.5 million.

The deals follow similar purchase agreements between the two parties as both the franchisee and franchisor continue to strive for contiguous, rather than scattered, operations. NPC also said this newest deal will provide the franchisor with more cost-effective test markets. The latest moves will create a net gain of 13 locations for NPC, bringing its total number of restaurants to 1,111, or about 18-percent of Pizza Hut’s domestic system. 

Under the newest deal NPC will purchase from Pizza Hut, which is a division of Yum! Brands Inc., 55 restaurants for $18.5 million in cash, and Pizza Hut will purchase from NPC 42 restaurants for $19.0 million in cash.

The units that NPC is set to acquire are located near Denver and include 37 delivery and carry-out units and 18 dine-in restaurants. Fifty-three of the restaurants generated an aggregate $49.8 million in sales for the year ended in September, NPC reported. The other two locations set for acquisition were recently constructed, the company added.

The Pizza Hut locations that NPC is selling to the franchisor are located near Evansville, Ind., and Shreveport, La., and include nine delivery and carry-out units and 33 dine-in restaurants. Forty-one of the units generated a total of $36.0 million in sales for the year ended in September, and the remaining unit to be sold was recently constructed.

“This transaction, like the one we completed earlier this month with Pizza Hut, was designed to meet the strategic objectives of both companies,” Jim Schwartz, chairman and chief executive of Overland Park-based NPC, said in a statement. “It positions us to expand our operations into the growing mountain west and improves our credit statistics, while providing Pizza Hut with more cost-effective markets for their test market activities.”

NPC will record a non-cash, pre-tax charge of between $15 million and $19 million in the current fourth quarter from the sale of its locations for the anticipated write-down of assets, including franchise rights and goodwill. For the nine months ended Sept. 23, NPC reported net income of $7.3 million on sales of $564.2 million, compared with earnings of $5.6 million on sales of $518.3 million a year earlier.

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