Flynn Restaurant Group is ready to increase its investment in Pizza Hut's Australian arm as it supports local CEO Phil Reed in his mission to rival market leader Domino's (ASX:DMP).
"We believe that Reed and the management team at Pizza Hut Australia are already doing an excellent job, and we believe they are capable of even more," said Ron Bellamy, co-chief operating officer of Flynn Restaurant Group, from the company's headquarters in Cleveland, Ohio. "Hopefully, we can provide some investment and leverage our expertise from our experiences in the US."
The purchase of Pizza Hut Australia by Flynn, the largest restaurant franchise operator in the US, from private equity group Allegro, is expected to be finalised by the end of July. While the exact price for acquiring the Pizza Hut franchise was not disclosed, it is estimated to be less than $100 million.
With a portfolio of 2,350 restaurants, including 926 Pizza Huts, 282 Taco Bells, and 192 Wendy's, Flynn Restaurant Group aims to leverage its resources and expertise to support Pizza Hut's growth in Australia.
Under the leadership of Phil Reed, Pizza Hut Australia has increased its market share from around 7 percent when he took over in April 2018 to approximately 10 percent. Reed has expressed his determination to reclaim the number one position in the local market by aggressively expanding Pizza Hut's store footprint over the next five years, challenging the dominance of market leader Domino's.
Pizza Hut opened 17 new stores in Australia last year and an additional six this year, including one in Wagga, bringing the total number of stores to around 260. In comparison, ASX-listed Domino's currently dominates the market with approximately 755 stores.
In the US, Flynn Restaurant Group operates a portfolio of 2,350 restaurants, including 926 Pizza Huts, 282 Taco Bells, and 192 Wendy's.
Reed's goal is to increase Pizza Hut Australia's turnover from around $300 million to over $1 billion in the coming years. He believes there are as many as 500 "trading zones" across the country that could potentially support new Pizza Hut outlets.
"We have around 55 percent of the Australian public who have yet to experience the opportunity of having Pizza Hut pizzas delivered to their homes," Reed said. "There is a significant opportunity, whether it involves growing the brand or opening new stores."
Pizza Hut has reported 52 consecutive months of same-store sales growth, with a value growth of 14 percent and transaction growth of 10 percent last year. The company achieved its biggest trading day ever in Australia on June 21, coinciding with the second State of Origin rugby league clash between NSW and Queensland, generating a turnover of over $1.3 million in a single day.
Bellamy affirmed Flynn Restaurant Group's commitment to support Pizza Hut Australia's expansion plans with additional capital. The company is open to backing new Pizza Hut businesses and considering a balance between franchise stores and company-owned stores.
While Flynn's primary focus is on Pizza Hut, Bellamy also acknowledged the potential for broader participation in Australia's quick-service food business. He stated that Flynn will explore opportunities when the timing is right.
The acquisition of Pizza Hut Australia marks Flynn Restaurant Group's first venture outside the US market. Bellamy noted that the Australian business aligns with their criteria of a well-known brand, a comfortable operating environment, and a strong management team.
Moreover, there are opportunities for Pizza Hut Australia to enhance its existing stores, including menu innovation, the introduction of new products, and an increased marketing budget. Bellamy emphasised the company's dedication to utilising marketing resources and driving business growth.
With Flynn Restaurant Group's support and expertise, Pizza Hut Australia aims to strengthen its position in the market, challenge Domino's dominance, and deliver greater value to Australian consumers.
