Pizza Hut has negotiated a new renovation requirement with franchisees that aims to remodel or rebuild 10 percent of franchised stores annually, according to securities filings by the chain’s largest franchise operator, NPC International.
It apparently supersedes a 2003 agreement that would have required franchisees to update 15 percent of their stores annually beginning in 2016.
The extent of the makeover required under the new deal is determined by the age of the store, its format and possibly the population density of its location, NPC said. It did not reveal what assistance, if any, the franchisor would provide.
The requirement extends through 2025, by which time the whole domestic system will have been renovated. Afterward, franchisees would alternate between major and minor remodels, NPC said in a filed Form 10-K. A minor renovation would be mandated 10 years after a major makeover. A major overhaul would be required seven years after a minor remodel.
NPC noted that the requirement, called the Asset Partner Plan, applies to “qualifying franchisees,” but did not reveal the criteria for qualifying. If a franchisee does not qualify, NPC said, it would have to meet the more aggressive remodeling plan mandated by the 2003 agreement.
The new plan was jointly presented to the system by the franchisor and the chain’s franchise association in March.
NPC said it expects to spend an average of $20 million annually to meet the requirements of the Asset Partner Plan. The company revealed that re-dos of dine-in sites would likely consist of replacing them with delivery- and takeout-only restaurants.
The company operated 1,243 Pizza Huts as of Dec. 29.
It also runs 147 Wendy’s restaurants.