NPC Intercontinental, the major franchisee of Pizza Hut restaurants, submitted for Chapter eleven personal bankruptcy on Wednesday as the decline of the Pizza Hut manufacturer proceeds to eat into its income.
The firm has $903 million in financial debt and has pre-negotiated a restructuring agreement with about 90% of its initially lien creditors and seventeen% of 2nd lien creditors.
As CNN experiences, privately-held NPC, which also franchises Wendy’s restaurants, has been dealing with “a ideal storm of problems” that led to the Chapter eleven filing, together with coronavirus-linked shutdowns, its large financial debt burden and soaring labor and meals costs.
Amid declining sales at Pizza Hut, it experienced formerly obtained $35 million in emergency funding from creditors soon after warning it would exhaust its working capital by mid- to late January 2020. NPC claimed Wednesday it intends to use the personal bankruptcy process to “engage in additional discussions with its manufacturer companions, landlords and other collectors to realize a consensual Chapter eleven plan of reorganization.”
The problems struggling with the firm “have been magnified not too long ago by the impact and uncertainty of COVID-19, and we imagine it is needed to just take proactive techniques to strengthen our capital structure,” Jon Weber, CEO of NPC’s Pizza Hut division, claimed in a news release.
NPC operates additional 1,600 franchised restaurants, 1,200 of them in the Pizza Hut system. In a court declaration, Main Restructuring Officer Eric Koza claimed the Pizza Hut restaurants have been “a major drag on [its] profitability due to a lack of sales progress and a major inflationary cost surroundings.”
“The Pizza Hut small business has specifically been impacted by a manufacturer impression and merchandise offering that has lagged guiding its opponents,” he added, noting that “the major change and expanding prevalence and use of 3rd-occasion shipping and delivery companies, these types of as DoorDash and GrubHub, has also amplified the competition for shipping and delivery website traffic and off-premises orders.”
According to NPC, its Pizza Hut restaurants noticed “a substantial spike” in sales as the COVID-19 pandemic minimized options for meals shipping and delivery and just take-out but Wendy’s has been strike by decreases in sales as a result of a “dramatic decline in foot and generate-via website traffic.”
Presley Ann/Getty Photos for Pizza Hut/em>