Staff and franchise costs dent Pizza Hut UK profits despite rising like-for-likes
Pizza Hut UK, which runs 266 branded restaurants across the country, saw its pre-tax profit fall 40% in 2016, due in part to increased franchising and staff costs.
In its annual accounts for the period from 30 November 2015 to 4 December 2016, the company reported a 3% decline in turnover, down to £232.7m.
Despite that, like-for-like sales were 3% higher than the previous year, which the company said reflected the benefits of its refurbishment programme. Since the business was acquired in 2012 by Rutland Partners, the restaurant estate has been undergoing a gradual refurbishment, as part of a wider £60m investment.
A total of 192 restaurants had been revamped by the year end and Pizza Hut pointed to these improvements and related initiatives, as well as the closure of six restaurants during the year, to explain the fact that it outperformed the industry in terms of like for like sales growth in 39 out of the 53 weeks of the year, as measured against the Coffer Peach Business Tracker. The Coffer Peach Business Tracker collects sales figures directly from 36 casual dining companies.
Pizza Hut predicted that sales would continue to build in 2017 and 2018 as the company benefits from the full financial year trading impact of the 2016 refurbishments, as well as the additional refurbishments that will take place over the next 12 months.
However, pre-tax profit was down from £7.9m in 2015 to £5.2m in 2016. Operating profit dropped from £8.1m in 2015 to just under £5.7m in 2016. Pizza Hut said that in addition to increased royalty rates under its franchise agreements, the introduction of the National Living Wage and other business costs had impacted profits.
Meanwhile, the company also launched its apprenticeship programme in 2015, offering 1,500 apprenticeships over the next five years. It has also pioneered a degree programme in partnership with Manchester Metropolitan University. The first participants joined the university's business training programmes in September 2016.
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