Yum! Brands executives said Pizza Hut will likely see domestic locations decrease by nearly 500 stores over the next two years as the brand closes underperforming dine in restaurants and swaps them out for modern express stores.
“We are leaning in to accelerate the transition of our Pizza Hut U.S. asset base to truly modern delivery carryout assets,” David W. Gibbs, president and chief operating and financial officer, said during the company’s second quarter conference call. “This will ultimately strengthen the Pizza Hut business in the U.S. and set it up for faster long-term growth.”
While this transition is occurring, Gibbs said “we expect a temporary deceleration in the pace of new unit development for the Pizza Hut division.”
“Our U.S. store count could drop to as low as 7,000 locations over the next 24 months primarily driven by closures of underperforming dine-in restaurants before rebounding to current levels and above in the future,” he said.
In 2018, Pizza Hut closed its fiscal year with 7,482 U.S. restaurants, according to NRN’s Top 200 research.
The closures come as the chain has been struggling with domestic same-store sales, which took a turn for the better in the second quarter. In the U.S., same-stores sales at the Plano, Texas-based brand rose 2%.
Yum CEO Greg Creed said he was pleased with the Pizza Hut results, which was driven by value promotions. However, to truly succeed the brand needs to pivot away from dine-in locations, he said.
“Same-store sales growth in the U.S. will continue to be choppy without transforming the asset base,” Creed said Thursday during Yum’s earnings call. “We plan to lean into accelerate the transition of our Pizza Hut U.S. estate to a more modern delivery and carryout focused asset base. This will ultimately position the Pizza Hut brand for many years of faster growth in the U.S.”
He said the brand will collaborate with franchisees “who are capable, well-capitalized, committed to the brand, and have a growth mind-set to accelerate the closure of underperforming dining stores and replacement with new delivery or fast casual delivery assets.”
Though the company has been investing in growing delivery and smaller format restaurants, last year company president Artie Starrs said he was frustrated that the brand is not getting credit for those changes. Starrs was named Pizza Hut division CEO last month.
In many parts of the country, especially markets with a heavy presence of legacy “red roof” dine-in restaurants, consumers don’t realize the chain delivers, Starrs said.
Pizza Hut has more than 16,800 restaurants around the world. Of those, about 7,500 are in the U.S.