NPC Intercontinental, the major franchisee of Pizza Hut eating places, submitted for Chapter eleven personal bankruptcy on Wednesday as the decrease of the Pizza Hut brand name continues to take in into its income.
The company has $903 million in credit card debt and has pre-negotiated a restructuring arrangement with about 90% of its initial lien lenders and 17% of second lien lenders.
As CNN experiences, privately-held NPC, which also franchises Wendy’s eating places, has been dealing with “a fantastic storm of problems” that led to the Chapter eleven filing, together with coronavirus-associated shutdowns, its massive credit card debt stress and climbing labor and food items prices.
Amid declining gross sales at Pizza Hut, it experienced beforehand attained $35 million in crisis funding from lenders right after warning it would exhaust its doing the job cash by mid- to late January 2020. NPC mentioned Wednesday it intends to use the personal bankruptcy process to “engage in additional discussions with its brand name partners, landlords and other lenders to attain a consensual Chapter eleven strategy of reorganization.”
The challenges dealing with the company “have been magnified just lately by the impact and uncertainty of COVID-19, and we believe it is necessary to take proactive methods to strengthen our cash construction,” Jon Weber, CEO of NPC’s Pizza Hut division, mentioned in a news launch.
NPC operates extra 1,600 franchised eating places, 1,two hundred of them in the Pizza Hut procedure. In a court declaration, Main Restructuring Officer Eric Koza mentioned the Pizza Hut eating places have been “a substantial drag on [its] profitability thanks to a absence of gross sales advancement and a substantial inflationary price tag natural environment.”
“The Pizza Hut enterprise has especially been impacted by a brand name picture and solution offering that has lagged powering its competition,” he additional, noting that “the substantial change and rising prevalence and use of third-get together shipping expert services, this sort of as DoorDash and GrubHub, has also elevated the opposition for shipping targeted traffic and off-premises orders.”
In accordance to NPC, its Pizza Hut eating places noticed “a substantial spike” in gross sales as the COVID-19 pandemic reduced alternatives for food items shipping and take-out but Wendy’s has been hit by decreases in gross sales as a final result of a “dramatic decrease in foot and travel-through targeted traffic.”
Presley Ann/Getty Illustrations or photos for Pizza Hut/em>