RESOLVING THE LEDGER
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See the full story · 1 sourcesA Pizza Hut restaurant in Miami Joe Raedle/Getty Images
Donald Trump once starred in ads for Pizza Hut — a brand that exported American fast food to the wider world.
But many Pizza Hut locations have shuttered in recent years, and the company is being sold for $2.7 billion.
Jan Klauth, a correspondent from Germany's Welt, visited the US searching for an explanation of the decline.
Highway 321 runs like a lifeline through Pigeon Forge, a tourist town in the US state of Tennessee. On either side of the road, at the foot of Great Smoky Mountains National Park, amusement parks sit alongside two-story motels and toothless fast-food joints with drive-through windows — it doesn't get much more American than this.
Inside a Pizza Hut branch here, televisions flicker against beige tiled walls, the windows have taken on a yellowish film, and garlands reading "We love USA" dangle from the ceiling, swaying wearily in the breeze of the air conditioning. After nearly half an hour's wait, a young employee in an apron, who looks as though he's simply killing time on his summer job, calls out a number: one large pepperoni pizza, $22, the crust thick and glistening with oil.
The whole scene feels bleak , almost like a swan song — as if the branch's days were already numbered. And that is no coincidence. Across the country, one Pizza Hut location after another is shutting its doors.
For decades, the brand was so deeply embedded in the American collective memory that its decline once seemed unthinkable. When brothers Dan and Frank Carney founded their first restaurant in Kansas in 1958, they had to borrow the startup capital from their mother.
Just a few years later, the company's then-revolutionary franchise business turned the pizza market upside down. The red roof became a cult symbol of fast food "Made in America" — not just in the US, but in dozens of other countries around the world, much like the McDonald's golden arches.
A Pizza Hut designed to look like early locations. Daland Corporation/Reuters
Now the chain, owned by parent company Yum!, has been sold , split into two parts. Yum! Brands announced the deal in June; both transactions are expected to close in the third quarter, pending regulatory approval. Because Yum China has operated Pizza Hut's mainland China business independently since splitting off from its US parent in 2016, the sale had to be structured as two separate deals: one for China, one for everywhere else.
A new owner of an aging brand
The US business and the rest of the world (except China) is going to Connecticut-based private equity firm LongRange Capital for roughly $1.5 billion. The firm, founded only in 2019, currently holds stakes in businesses as varied as the American fitness chain 24 Hour Fitness and ski lifts in the Austrian resort of Kitzbühel — a leap into global chain restaurants with nearly 20,000 locations is something of new territory for founder and managing partner Bob Berlin and his team.
Mainland China's operations , meanwhile, are being taken over by Yum China Holdings which already operates KFC, Taco Bell, and, indeed, Pizza Hut as a licensee in China. For Yum China, the acquisition essentially means expanding a business it already runs on the ground — for roughly $1.2 billion, the company secures full brand rights to Pizza Hut's by far most important international market. In China, the chain counts nearly 4,500 locations across 1,200 cities.
What the deal means for Pizza Hut's future, and whether a rebranding is more likely than an even higher number of closed restaurants, seems unclear. Yum left a press inquiry unanswered as did the US buyer.
"Pizza Hut is still one of the most recognized names in the market," Ishann Dhawan tells Business Insider. "If the economics improve, the brand will benefit. If they don't, a rebrand won't change very much," says the restaurant-management consultant, based in France.
But whether the new owners can push through the long-overdue modernization faster than the old corporate machine remains to be seen in the coming years. Wall Street doesn't seem entirely convinced yet: Yum's stock, currently trading around $151, moved only slightly following the sale. After the share price tumbled roughly a year ago, it has barely recovered since.
"People haven't stopped liking pizza," says Dhawan. "The market is still enormous." Rather, he argues, the way pizza is sold in the US has changed — and Pizza Hut slept through that shift. Customer behavior, he says, has changed fundamentally. Pizza Hut restaurants once stood for an experience — places you took the kids, celebrated birthdays, or held company parties: planned but relatively rare visits.
Today, it's more about the simplicity of ordering and speed of availability — and, not least, price. The restaurants suddenly seemed out of step with the times. The comparatively large dine-in locations, with their high rent, staffing, and maintenance costs, no longer fit a market where customers above all expect fast delivery and easy ordering, Dhawan says. Competitors like Domino's invested earlier in digital ordering systems and delivery infrastructure, lowering their operating costs in the process — however, their stock isn't exactly skyrocketing either, losing about 13 percent over the last 12 months.
What LongRange plans to do differently is still largely an open question. In its own announcement, Berlin said the firm looks forward to "working with Pizza Hut's talented team and franchise partners to drive its next phase of growth through investments that deliver consistently great food and experiences for customers."
Restaurant Business editor Jonathan Maze noted that LongRange "focuses on operational and strategic improvements to generate a return, rather than financial engineering" — a longer-term approach than the debt-and-cost-cutting playbook typical of private equity, and, in his view, "exactly what the brand needs."
But LongRange is a comparatively small player ...
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