Pizza Hut’s largest US franchisee is reportedly weighing options, including bankruptcy – CNBC

Restaurant News

A customer enters a Pizza Hut restaurant in Princeton, Illinois.

Daniel Acker | Bloomberg | Getty Images

Pizza Hut’s largest U.S. franchisee is weighing restructuring options, including bankrutpcy, Bloomberg reported Wednesday.

NPC International, which has about $1 billion in debt, operates nearly 400 Wendy’s restaurants and more than 1,200 Pizza Huts.

People familiar with the matter told Bloomberg that the franchisee has begun negotiating with its lenders. The company is trying to keep the restructuring out of court but is considering the possibility of filing for bankruptcy with a pre-negotiated plan in place, according to the outlet.

In 2019, the franchisee saw its debt slide further and further into junk territory after credit downgrades from S&P Global Ratings and Moody’s. Both ratings agencies downgraded NPC’s debt this week after it did not make interest payments due to lenders on Jan. 31.

Yum Brands’ Pizza Hut, historically known as a dine-in restaurant, has struggled because more consumers want their food delivered. High food and labor costs have eaten into profits. Same-store sales at U.S. restaurants fell 2% during the pizza chain’s fourth quarter.

“There is potential for choppiness in near-term results of Pizza Hut U.S., primarily related to our largest franchisee,” Yum CFO Chris Turner told analysts earlier in February.

Shares of Yum, which has a market value of $31.3 billion, were trading down 1% on Thursday morning. The stock of rival Domino’s Pizza, which has a market value of $15.1 billion, surged 24% after its fourth-quarter earnings topped estimates.

Read more about NPC International’s options here.

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