Pizza Hut refurbs spark sales and EBITDA rise

21 May 2015 by
Pizza Hut refurbs spark sales and EBITDA rise

The rejuvenated restaurants at Pizza Hut, which is a third of the way through the refurbishment of its estate, have helped push up sales and EBITDA for the entire group.

That's according to chief financial officer Adrian Walker, who was speaking ahead of the release of the company's financial results, due to be released early next month.

The Pizza Hut restaurant business, which was acquired from Yum! Brands by private equity firm Rutland Partners in October 2012, started its refurbishment programme with its Crawley site in October 2013.

Since then, it has "reimaged" a total of 82 restaurants, out of an estate currently numbering 275 sites. In addition to a new menu with items such as fries, onion rings, and starters like spicy BBQ ribs and Alabama style popcorn shrimp sitting alongside the traditional pizza options, the restaurants have been given a more informal and relaxed look. The design combines leather booth seating, wood-panelled walls, and more prominent bar areas to try and boost sales in the evening, with a careful seating layout designed to optimise volume growth by ensuring tables can be turned quickly and wait times for customers are reduced.

Walker said that despite only representing 30% of the total estate, the refurbished restaurants accounted for 35% of total sales and 40% of EBITDA in the period to the end of April 2015.

Speaking about the changes, deputy managing director Henry Birts said: "We are delighted where we are on the refurbishment programme. It has exceeded our expectations. We are very happy but we are not complacent and there is a long way to go. But it is really starting to flow through to our top line and our bottom line."

Walker added: "Two and a half years ago when Rutland acquired this group we were in negative growth and we had a big gap between us and our competitor set. Over the first 18 months that growth improved and that gap reduced. What is really exciting for us is that at the start of this year, not only are we in strong positive growth but we are actually currently outperforming the competitor set."

Birts said that the strategy in making the changes to the menu and to the look and feel of the restaurants was to strengthen the position of the 40-year-old brand with young families, as well as regaining its relevance to the pre-family millennial generation.

"This is a generation who have had their heads turned by some very strong and innovative competition throughout the noughties," he said.

Investment in Pizza Hut's individual restaurants varies from £50,000 up to around £600,000 depending on the size and location of the site. Its site in the Strand in London, for example, has seen an investment of over £500,000, which has delivered 25% sales growth since February this year, of which 20% is accounted for by volume growth (ie more people coming through the door) and 5% is spend growth.

Meanwhile, the business has closed around 50 sites since its acquisition, which accounts for restaurants that were underperforming or not core to Pizza Hut's operations. Another eight to 10 closures are expected.

Birts said that the business would not rule out further expansion for the brand in the medium to long term should the right opportunities arise, although the main focus in the short term is to continue the rejuvenation of the existing estate.

Pizza Hut, which is headed by chief executive Jens Hofma, was reportedly bought by turnaround specialist Rutland Partners for a token £1. Rutland retained the management team and pledged to invest £20m into the business immediately and then to re-invest £40m of cashflow over the following five years when it announced the deal in 2012.

The deal excluded the Pizza Hut deliver business, which is still owned by Yum! Brands.

330 UK Pizza Hut restaurants sold to Rutland Partners >>

Pizza Hut to overhaul 80 restaurants in £60m project >>

Pizza Hut invests £1.7m in Scottish restaurant estate >>

The Caterer Interview - Jens Hofma >>

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