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Restaurant Brands signs on for 10 more years of pizza

Wednesday 24th June 2009

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Restaurant Brands New Zealand, which returned its Pizza Hut chain to sales growth for the first time in four years, signed a 10-year agreement to continue with the franchise while it sells down its stores to owner-operators.

The agreement with Yum! Brands Inc. “provides a framework for the progressive sell down of stores to individual owner operators” with up to 10 stores earmarked for sale in the first year, Restaurant Brands said in a statement.

“The pizza market in New Zealand has seen considerable changes over recent years,” the company said.” Substantial increases in the number of competitors have made certain stores better suited to hands-on management by owner operators rather than the corporate model under which Restaurant Brands currently operates its Pizza Hut stores.”

Shares of Restaurant Brands fell 1% to $1 after the announcement that the company will pursue the sale of Pizza Hut stores to independent franchisees. Pizza Hut sales rose 2.4% to $15.5 million, in the 12 weeks ended May 25, halting 15 consecutive quarters of declines after the launch of new products, operational improvements and increased marketing efforts.

It competes with chains including Dominos and Hell Pizza, which have been engaged in so-called pizza wars, offering ever cheaper deals to bolster market share.

The company is rated ‘outperform’ based on the consensus of three analysts, according to Reuters. Its shares have climbed 35% in the past three months.

Restaurant Brands will continue to run marketing and operations for Pizza Hut in New Zealand, according to its statement today. Yum! will provide support during the selldown and assignment of franchise agreements to the new franchisees, it said. As part of the deal, Restaurant Brands will have access to Pizza Hut marketing and advertising materials from Yum Australia.

A small number of unprofitable Pizza Hut outlets will be closed and the eight remaining dine-in restaurants will be shuttered by 2010.

Proceeds from the sale of Pizza Hut stores will be used to repay debt.

Businesswire.co.nz

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