On Wednesday, NPC International, a company that owns and operates the said Pizza Hut and Wendy’s restaurants, filed for Chapter 11 protection in the Texas Southern Bankruptcy Court.
NPC has struggled financially in recent years, in large part because of the performance of its 1,227 Pizza Hut restaurants, which make up about 20 percent of all of the chain’s US locations, according to the company’s filing.
Pizza Hut has struggled to grow same-store sales across the system, as rivals such as Domino’s and Papa John’s have thrived.
NPC, which was founded in 1962 have struggled with rising labor and food cost while trying to expand delivery and move away from traditional dine-in restaurants. The Overland Park, Kansas-based company also faces cut-throat competition from rivals such as Domino's Pizza Inc. and Papa John's International Inc.
The company has $903 million in debt and has pre-negotiated a restructuring agreement with about 90% of its first lien lenders and 17% of second lien lenders. The plan is aimed at reducing the company's debt, with first lien lenders taking equity and potentially participating in a new cash injection. It also includes the sale of at least part of the company's restaurants, according to the filing.
NPC said in the filing that Pizza Hut sales were once again declining and the pandemic has contributed to longer-term issues, such as rising labor costs and the availability of ingredients, including fresh beef.
The bankruptcy filing does not mean that NPC will close Pizza Hut or Wendy’s locations. Instead, NPC is attempting to reduce debts, including plans to sell some of its restaurants.
Pizza Hut said in a statement NPC’s filing was “expected” and that the chain viewed it as “an opportunity to create a better future for NPC’s Pizza Hut restaurants.”
Under the deal with its lenders, NPC will start trying to sell its Wendy's restaurants in the coming days. Meanwhile, the company has until July 24 to work out a deal with certain creditors and Pizza Hut itself on how to restructure NPC's pizza business. If they can't come to a deal, NPC will try to sell an unspecified number of its Pizza Hut restaurants, according to a restructuring outline filed with the court.