Is Pizza Hut In Worse Shape Than Thought?

Pizza Hut is considered the weakest restaurant chain in Yum! Brands, Inc.'s YUM portfolio, and it may be in worse shape than previously thought, as its largest franchisee is reportedly close to filing for bankruptcy.

NPC Is Pizza Hut's Largest Operator 

NPC International is the largest franchisee of Pizza Hut stores in the U.S. with more than 1,200 locations.

Sources told Bloomberg NPC is negotiating terms with lenders, as it is cash-strapped after months of falling sales. NPC defaulted on $800 million in debt after it skipped a loan payment in late January and is now in a forbearance agreement with its lenders.

NPC is now looking to restructure debt and hopes to stay out of court, but is also exploring a bankruptcy filing, the Wednesday report said. 

Sources told Bloomberg that Pizza Hut stores under NPC's control have seen a 2.5% same-store sales decline in the most recent quarter. NPC's EBITDA also fell 16% in the quarter to $16.2 million.

Yum Acknowledges Franchisee Struggles 

Yum executives said they're aware that some operators are facing financial difficulties during  recent conference calls, according to Bloomberg.

Company spokeswoman Virginia Ferguson told Bloomberg that she wouldn't comment on any individual franchisee, but did say Yum with struggling franchisees to "make sure we have the healthiest franchise system possible to grow and strengthen the brand."

NPC is working with restructuring experts and investment bankers, according to Bloomberg.

Yum shares were down 0.17% at $103.77 at the time of publication Friday. 

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