Potential Buyers Could Take the Pizza Brands off the Market to Focus on Long-Term Turnaround Plans
- Sales of Papa Johns and Pizza Hut could be close.
- Both restaurant brands are likely to be taken private so new owners can take measures to improve their performance.
- Pizza Hut operates 20,000 restaurants globally; about 99% are franchises.
- Papa Johns has 6,000 restaurants worldwide and more than 90% are franchised.
Papa Johns and Pizza Hut may soon be sold, according to an article posted by The Economic Times, which attributed the news to five people familiar with discussions. Both pizza restaurant brands are fighting the financial challenges of strong competitors, increasing ingredient costs and declining customer traffic. And both have said they would need to shutter hundreds of restaurants in order to rejuvenate financially.
Papa Johns has been slammed by weak same-store sales, falling revenue, intense competition and CEO turnover, The Economic Times reported. The brand’s stock price peaked at roughly $130 per share in late 2021. Pizza Hut sales also are falling, which has pulled down the overall earnings of its multi-brand owner, Yum! Brands; the franchisor’s Taco Bell and KFC franchises have notched superior performances.
Why are so many pizza franchises performing poorly these days? Because they’re engaged in price wars with each other and with other meal options, The Wall Street Journal reported in January of this year. Food-delivery apps give customers easy access to a wide range of foods, and $20 for a pizza can seem pricey compared to, say, a $5 McDonald’s value meal, a frozen grocery store pizza or an alternative meal that’s cooked at home, The Journal noted in its report.
Why Brands Might Go Private
New Pizza Hut and Papa Johns owners are likely to take the iconic pizzeria brands private, removing them from stock exchanges and government-mandated earnings reports, the sources said. Doing so would give executives an opportunity to regroup and strategize enhancements to operations. (The Economic Times noted that other recent restaurant acquisitions have led to a couple of high-profile brands being taken private post-sale: the investor group that paid $620 million for Denny’s and private convenience store chain RaceTrac’s acquisition of Potbelly for $566 million.)
Articles by Reuters and Merca20.com said that taking the pizza brands private would allow their leaders to:
- Restructure the pizzeria chains’ business models.
- Close poorly performing restaurants.
- Modernize locations and upgrade operational processes.
- Operate with an eye to long-term improvements instead of being pressured to show positive results in quarterly reporting.
Deals in the Works?
The Qatari-backed investment fund Irth Capital, backed by Brookfield Asset Management, offered $47 per share for Papa Johns in March, according to two of The Economic Times’ sources. Papa Johns stock prices had fallen to roughly $35 a share on Tuesday. Irth and Papa Johns representatives continue talking, the sources said, although it’s still possible that no deal will be struck.
Yum! Brands set a deadline this week for potential Pizza Hut buyers to submit formal bids, three people familiar with the talks told The Economic Times. Private equity firms Apollo Global Management, LongRange Capital and Sycamore Partners are among those interested in acquiring the brand. Yum! Brands might narrow the field and do one-on-one negotiations after the deadline passes, or it could keep the chain.
The Economic Times reported that representatives of Yum! Brands, Papa Johns, Irth, Apollo and Sycamore declined to comment for the article. LongRange did not respond at all.
Hubbub About Sales
Speculation around both brands increased after Yum! Brands said in November that it would conduct a strategic review of Pizza Hut and after Papa Johns reportedly rejected much higher purchase offers last year, The Economic Times reported.
Todd Penegor, who took over as CEO of Papa Johns in late 2024, said in March that he is focused on operating the company and wouldn’t comment on sale rumors. “I mean, it’s been a constant, right? I’ve been in the role 18 months, and I think almost the full 18 months, we’ve always had some kind of rumor out there around the brand,” The Economic Times quoted him as saying.
About Papa Johns and Pizza Hut
Pizza Hut had close to 20,000 restaurants open around the globe about six months ago. About 99% of them are franchised. The pizzeria brand has more than 6,000 locations in the United States. Pizza Hut was founded in 1958. Early this year, Papa Johns reportedly was operating roughly 6,000 restaurants worldwide. More than 90% are franchises. Founded in 1984, the brand has 3,500-plus domestic units; it has restaurants in more than 45 countries.
