- Yum! Brands on Tuesday said that it is exploring a possible sale of the Pizza Hut brand.
- I ate at two locations to see why the chain is struggling enough for Yum! to consider a sale.
- While the food was on par with other pizza chains I've tried, Pizza Hut's value is unclear.
Pizza Hut, one of America's most recognizable pizza chains, is facing an identity crisis.
Yum! Brands, Pizza Hut's parent company, said on Tuesday that it is exploring a potential sale of the red-roofed icon. The announcement came as the company reported that Pizza Hut's same-store sales fell 1% during the third quarter, marking the eighth consecutive quarter of declines.
I visited two Southern California locations to see why Pizza Hut is falling behind and found a restaurant caught between its nostalgic past and an uncertain future. Although Pizza Hut's food is still solid, it appears to be struggling to prove its value to consumers in today's crowded dining scene.
"The Pizza Hut team has been working hard to address business and category challenges; however, Pizza Hut's performance indicates the need to take additional action to help the brand realize its full value, which may be better executed outside of Yum! Brands," Chris Turner, chief executive of Yum! Brands, said in a Tuesday statement.
He said on the company's earnings call that day that it's reviewing strategic options, which could include a sale of the Pizza Hut business. Yum! Brands has retained Goldman Sachs and Barclays as financial advisors to review potential deals.
A representative for Yum! Brands declined to comment beyond the company's public statements.
Founded in 1958, Pizza Hut rose to prominence with its sit-down style family restaurants, which featured its once-famous salad bar. However, it began scaling back its large-scale formats in the early 2000s and now primarily operates take-out-only stores.
Stepping into the first location, about 60 miles northwest of Los Angeles, I was greeted by the familiar scent of baking crust and melty cheese — but no menu board in sight. Instead, a small cardboard pop-up near the register displayed several ads for meal deal specials and a QR code I could scan to see the full menu.
The omission of a full menu display suggested the company has become more dependent on deliveries and online orders than in-person visits to the counter.
I opted for a personal pepperoni pizza, once a staple of my childhood, thanks to Pizza Hut's "Book It!" program. To this day, the program offers school-aged kids free pizza when they submit proof that they've reached their monthly reading goals. As an adult with no completed reading log, however, the four-slice miniature pizza cost $9.70.
The pizza was exactly as expected: crispy on the bottom, with a hint of sweet marinara sauce, melted mozzarella cheese, and two pepperonis per slice, but I was struck by the price point for such a small meal.
Pizza prices have increased by more than 15% over the last five years, while more operators are offering pizzas and flatbreads on their menus, Restaurant Business Online reported in October, citing Technomic data. Once considered a value option, 35% of consumers now choose to order pizza less frequently due to increased costs, the outlet reported.
That means stiffer competition for Pizza Hut, which has to compete with more chains, from Domino's to Little Caesars, for fewer potential customers.
Business Insider reported in August that, as consumers tighten their belts and eat out less, they're becoming increasingly loyal to their favorite brands and seeking out coupon deals when they do choose to dine out.
At the second location, I noticed a prominent ad for a value-focused offering: Pizza Hut's new "Flatzz" menu items. These thin-crust flatbreads are priced at just $5.46 after tax when they're ordered before 5 p.m.
The "Flatzz" pizza seemed to be a better deal. It offered eight slices of pizza with more flavor than the personal pizza at the first store. The flatbread option was a good value, and I wouldn't have known it existed had it not been for the sign near the door.
Both restaurants were clean, the staff inside were friendly, and Pizza Hut still has the ingredients that made it a household name — the gooey cheese, familiar logo, and comforting nostalgia.
However, in the current dining landscape, familiar pizza is no longer enough to guarantee a seat at the table. Pizza Hut's next challenge is to convince customers that it still offers value in a market where "fast" and "cheap" have become the default ingredients for success.
