Ed’s Daily Notes for August 7th   Leave a comment

Business Week: Pizza Hut Is Having Some Problems in America

Pizza Hut, the country’s largest pizza chain, seems to be losing favor with American diners. The 56-year-old pizza restaurant’s same-store sales in the U.S. have fallen for seven consecutive quarters as competitors Domino’s (DPZ) and Papa John’s (PZZA) have seen sales increase.

…Pizza Hut remains the largest pizza chain in the U.S. by far, with more than 7,800 restaurants—it continues to add more locations. But, says Darren Tristano, executive vice president at research firm Technomic, as quick-service competitors such as Papa John’s, Domino’s, and Little Caesars cut into Pizza Hut’s U.S. business, new fast-casual, made-to-order pizza concepts are also expected to steal market share.

If you are an investor in Yum! Brands (YUM), this has to be worrisome, since Pizza Hut is one of their largest chains. But the pizza industry has grown up in the past 30 years: Back in the 1980’s, Pizza Hut was about the best pizza available to many parts of the U.S., and they established their brand. Since then, Papa John’s came along and gave many people a comparable pizza. In recent years, even Little Caesars improved their quality and their cost, making them a better deal. But the main thing I have noticed is the explosion of smaller “mom and pop” pizzerias across the country, which provide better service and better quality pizzas. Even the quality of ingredients available in grocery stores for “make your own” pizzas has improved, not to mention the quality of frozen pizzas. If you are going to spend $10-20 for a pizza, why not get the best there is around you? Especially when the pizza chains have all cut back on the size of their pizzas as they have cut costs (yes, I have noticed).

I won’t go so far as to say the pizza chain concept is dead, but I will say they need a new idea, and soon. Otherwise, their market share will continue to erode away over the years to come.

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Posted August 7, 2014 by edmcgon in News

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