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Pizza Hut searches for the Fountain of Youth

The pizza chain has completely changed its business model and is actively courting younger consumers with items like Melts. There are early signs of success.
Pizza Hut fountain of youth
Pizza Hut believes the secret to its growth is to get younger. / GIF by Nico Heins.

Pizza Hut is apparently just like every other Baby Boomer: It wants to get younger.

The 64-year-old pizza chain has traditionally been popular among older consumers, who remember the brand fondly as the place they went to as kids after soccer games where they cashed in their Book It coupons.

But the brand understands that it needs to attract a younger group of diners if it is to generate sales growth over the long term.

“We are taking the brand to be younger and more every day,” Pizza Hut CEO Aaron Powell told investors at parent company Yum Brands’ “Investor Day” presentation this week. “It’s not a secret that Pizza Hut historically has been more popular with older people than with younger people and there are challenges with that.”

One of its recent product launches certainly helped. In October, the chain introduced its Pizza Hut Melts—handheld items that appear to be a cross between a quesadilla and a stromboli, priced at $6.99.

“It’s intentionally designed for young people to like it,” Powell said. It also gets at a consumer base Pizza Hut hasn’t had since its Personal Pan Pizzas were popular: The individual diner.

That’s a huge opportunity for Pizza Hut. Individual diners represent 45% of all fast-food occasions, Powell said. By contrast, just a quarter of quick-service pizza is the individual occasion. Pizza Hut Melts are targeted directly at those consumers.

So far, it appears to be working. Yum Brands executives hinted this week that Pizza Hut sales and traffic were strong so far this quarter.

According to the location tracking firm Placer.ai, foot traffic to Pizza Hut restaurants was up 4.1% in November, an improvement from the 0.3% increase in October. By comparison, traffic was down at both Papa John’s and Domino’s.

“All I’ll say at this point, we’re very pleased with our same-store sales growth, our transaction growth, our number of new customers and our number of repeat purchases since this has launched,” Powell said, noting that it is “all going in the right direction.”

Pizza Hut has undergone a complex metamorphosis in recent years. The brand was long known as a dine-in concept where families dined on pizzas and large refillable Pepsi products. But as more pizza occasions shifted to delivery, the company opted to change its business model, replacing those old “red roof” dine-in locations with delivery and takeout units more akin to Domino’s and Papa John’s.

It paid the price for doing so. Pizza Hut was the nation’s largest pizza chain just a few years ago. But as it closed those older locations, and some of its most prominent franchisees struggled, the brand’s location count dwindled. Unit count has declined each year since 2014. The number of locations has declined 17% over that period.

Rival Domino’s, which has since overtaken Pizza Hut as the largest pizza concept, has grown restaurant count by 29% over that same period.

But Pizza Hut’s franchise system has changed markedly in recent years, helped along by the 2021 acquisition of more than 900 Pizza Hut locations by Flynn Restaurant Group, the nation’s largest franchisee of any sort.

“Sixty-five percent of our U.S. restaurants are in the hands of franchisee owners that have joined us since 2015,” Powell said. “Ninety percent of our gross builds are with those new franchisees.”

That group appears poised to help Pizza Hut increase unit count this year for the first time since 2014. And they will further the chain’s shift to delivery and takeout. Powell said that 80% of Pizza Hut’s global sales are takeout and delivery “and it’s even higher in the U.S.”

“The U.S. system of 6,500 restaurants are transforming, are already becoming more and more delivery-focused assets,” Powell said. It helps that those delivery-focused assets have lower capital costs and a shorter payback period.

That shift also helps the company become more of an “every day” occasion. The company’s traditional model made it something of a special occasion meal. But it wants people to order its meals more often.

“We’ve got to get out of being the special occasion pizza,” Powell said. “We cannot be focused only on Friday, Saturday, Sunday nights with the family.”

Pizza Hut’s move to aggregators also appears to have helped the brand with its goal of getting more younger and more “every day.” Some 95% of the chain’s U.S. locations have a relationship with at least one third-party delivery provider. The chain is also testing more national campaigns and Powell even noted that the company brought in people from the aggregators themselves to “get smart on it.”

To be sure, it remains early for Pizza Hut. The chain’s “comeback” has been pronounced before. But with its closures seemingly in the past and a new product line targeted at younger consumers, the brand appears on the right track.

“We are just getting started,” Powell said. “It’s about building on the development engine that’s already going and then, very importantly, taking the brand so it’s as popular with my daughters as it is with my generation.”

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