GPS Hospitality, the Atlanta-based multi-unit operator of nearly 400 Burger King locations, has bought 75 Pizza Hut restaurants in four states bringing its quick-service empire to nearly 500 restaurants.
The Pizza Hut acquisitions were made in two separate undisclosed deals, GPS CEO Tom Garrett told Nation’s Restaurant News in an exclusive interview.
The deal widens the company's Southeast footprint as the 75 Pizza Hut locations are spread throughout Georgia, Alabama, Kentucky and Tennessee. Kentucky and Tennessee are new to the firm’s portfolio, which includes 388 Burger Kings and 19 Popeyes Louisiana Kitchen.
“The addition of the third brand and expansion into new territories are major milestones for our company,” Garrett said in a statement announcing the acquisition.
GPS has tapped industry veteran Kent Dawdy, left, as vice president of operations of the Pizza Hut division. Dawdy worked for Arby’s for 20 years. He most recently came from Atlanta-based Sterling Restaurants, which operates Shane’s Rib Shacks and Moe’s Southwest Grills.
As GPS looked to acquire a third concept, Garrett said Pizza Hut checked all the boxes it was looking for in a well-established brand.
“We think it fits very well within our strategy,” Garrett said. “We really like owning mature restaurant concept versus the trendy, cool and hip flavor of the month.”
Garrett declined to reveal the value of each deal, but the former Arby’s CEO said the Pizza Hut acquisition brings his company, founded in 2012, one step closer to a goal of reaching $1 billion in sales by its 10-year anniversary.
The company’s yearly sales are roughly $650 million, he said. This year, GPS also plans to open 15 new Burger King locations: two each in Georgia and Pennsylvania, one in Michigan and 10 in the Gulf region, which includes Louisiana, Florida, Alabama, and Arkansas.
The Pizza Hut buy marks a milestone for GPS as it grows its portfolio by acquiring a brand that doesn’t belong to Restaurant Brands International, the parent company of Burger King and Popeyes Louisiana Kitchen.
Pizza Hut is a division of Yum! Brands Inc., which also owns Taco Bell and KFC.
Garrett said he had known for some time that he wanted to diversify the GPS portfolio. To be clear, he said he wasn’t looking “away from RBI.”
Rather, he’d been scouting for a big opportunity within the pizza space. He said buying Pizza Hut was more of a “category decision” not a franchisor decision.
Still, Pizza Hut is a brand in transition, having struggled with same-store sales and brand relevance in recent years. At a 2018 investor conference, Artie Starrs, president of Pizza Hut’s U.S. division, said many consumers don’t realize Pizza Hut delivers.
The sentiment applies mainly to consumers who are more familiar with the brand’s older “red roof” dine-in restaurants. Roughly 40 percent of the Pizza Huts acquired by GPS are red roof restaurants.
Garrett is not concerned. He said Pizza Hut, in many ways, is in the same position as Burger King was when GPS formed in 2012. Burger King, he said, was lagging McDonald’s.
“[Pizza Hut] has underperformed Domino’s for several years, and we think there’s tremendous opportunity to close the gap,” he said.
He said the company will review the portfolio and begin making certain changes with the 75 restaurants, including refreshing stores, remodeling and “transitioning out of red roofs” in select locations.
Each location will be treated on a case-by-case basis, he said, adding that GPS has one overarching goal: providing a great customer experience.
“Ultimately, it’s about delivering hot food on time,” Garrett said.
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