On July 1st, the largest Pizza Hut and Wendy franchisee, NPC International had filed for Chapter 11 bankruptcy after it failed to reach the extended forbearance agreement, which expired on June 30, with Yum Brands. NPC franchises 1,227 and 393 restaurants of Pizza Hut and Wendy’s respectively with 7500 full-time employees and around 28500 part-time employees.
If a comparison is drawn with many other restaurants and Pizza Hut, the latter proves to be one of the rarest companies that had reported same-store sales growth in the month of April and May, due to its higher digital and delivery sales. But now, as a result of the covid-19 pandemic, NPC is highly burdened with a debt amounting around 1 billion dollars.
According to The Pittsburg, Kan., company, which had been operating Pizza Hut franchises since 1958, “uncertainty on trade and commodities” and “drastic shifts in labour market increasing pressure on hiring wages” was affecting Pizza Hut since the pandemic outbreak. Pizza Hut also faced a “deteriorating brand image”, that happened due to a congested pizza market and Yum Brand’s reluctance towards “brand development”, said NPC.
- Nigerian Scientists claim to have discovered vaccine for Covid-19
- Post Covid tourism; Vietnam and New Zealand to see different travel trends
Pizza Hut and Wendy’s being NPC’s largest creditors, reports claim that Yum Brand could experience a loss of $54.2 million of annual royalty revenue and 13 cents of annual earnings per share if NPC puts a halt in paying royalty fees.
Chapter 11 protection that NPC filed with the US Bankruptcy Court means that NPC still can operate and its pizza chain can continue to serve food, while it will have to try to turn around its business. This, however, is taken positively by the Pizza Hut officials. “While NPC’s Chapter 11 filing was expected, we view it as an opportunity to create a better future for NPC’s Pizza Hut restaurants. As NPC works through this process, we support an outcome resulting in an organization with a lower, more sustainable level of debt, ownership focus on operational excellence, and a greater level of restaurant investment” said a Pizza Hut spokesperson.