A lot of people felt a certain sort of nostalgic pang when Pizza Hut announced they would close
around 500 stores, starting in 2019.
What happened to this iconic pizza chain, and do they have a chance of turning it around?
This is the real reason Pizza Hut is disappearing across the country.
One of the biggest problems Pizza Hut faces isn't the pizza.
It's the hut.
Pizza is as popular as ever, but dining habits are changing, with more and more people opting
for take-out or delivery as opposed to dining out.
That's especially true when it comes to pizza, which helps explain why, according to Restaurant
Business, only about 10 percent of Pizza Hut's sales come from dine-in customers.
Still, prior to the initial round of store closings, more than half of Pizza Hut locations
were still primarily dine-in ventures, meaning they were paying waitstaff who didn't have
customers to wait on.
In 2018, Pizza Hut CFO David Gibbs addressed the problem on an earnings call, saying
"The challenge Pizza Hut faces is that it has a large dine-in business.
The drag dine-in is having on reported same-store sales masks the relative health of delivery
and carryout.
[…] Dine-in is waning in relevance."
There is some good news, though.
When Pizza Hut announced their intention to close roughly 500 locations, Gibbs suggested
that many of those were dine-in venues that would be replaced by new express locations
better suited to serving the nation's current need for pizza on the go.
The Pizza Hut Express format is already out there, with quick-serve counters in locations
like the Miami International Airport.
Pizza Hut Singapore describes the Pizza Hut Express concept as
"...a fast service counter concept specially designed to serve the busy professionals,
students and all who … are looking for a filling meal while on the move."
Dozens have already opened across the UK as well, and Big Hospitality says owner/operators
report huge successes with them.
Featuring a smaller menu than traditional Pizza Huts, including personal sized pizzas,
these Express franchises fit in locations such as stadiums and service stations where
a full-sized Pizza Hut wouldn't, and they're designed to be able to have an order out in
between 90 and 120 seconds.
Hey, when it comes to envisioning the future of pizza, the company has had worse ideas.
“Hydrate level 4 please!"
"Here you go."
"Oh boy, oh boy, mom, you sure can hydrate a pizza."
Every chain has a distinct identity, something you think of when you hear the mention of
a name or see a sign as you're driving along.
When you think of Burger King, you think of the Whopper and that creepy mascot, right?
McDonald's?
French fries and Ronald McDonald.
Subway?
Eat fresh.
Little Caesars?
Pizza, pizza!
And Pizza Hut?
...Pizza Hut?
"Bueller?
Bueller?"
According Greg Creed, CEO of Pizza Hut parent company Yum!, one of the things they're lacking
is a strong brand identity.
Any chain needs to cultivate an image, a reason for people to remember they're an option and
to encourage them to stop by.
But Creed says Pizza Hut's message, quote, "was not distinctive enough to attract new
customers."
And that's a huge problem — especially when its competitors are doing a much better job
defining the pizza market.
Over the past few years, Domino's has risen to the top of the American pizza business
at the same time that Pizza Hut has been in serious decline.
In 2018, CNN took a look at just how Domino's had risen to the top of the pile of national
pizza chains, and they said they did it with a combination of creative marketing, tech
innovations, and an overhaul to their menu and recipes.
But their price point was also a big deal, and they said that since Domino's is more
affordable than competitors — especially Pizza Hut — customers on a budget are choosing
Domino's.
And that's just about everyone who orders pizza, the nation's number one budget-friendly
dinner option.
Many budget-conscious families aren't just looking for great pizza, they're looking for
a great deal, which has led competitors like Domino's to offer discounts and special offers.
Yum!
CEO Gred Creed admits that Pizza Hut has fallen behind.
"We have to do a better job communicating better value."
In 2016, CNBC pointed out how important the millennial market was to the pizza industry.
Between 2015 and 2016, their share of the pizza market rose from $38.5 billion to $45
billion, and that meant they were a huge part of the industry's revenue stream.
So, you'd think that Pizza Hut would spend a lot of time and effort focusing on catering
to the millennial market and offering things like high-quality ingredients, a lot of choices,
and fast service.
They tried — and failed epically.
In 2014, Pizza Hut launched their "Flavor of Now" campaign, completely overhauling their
menu in an attempt to grab the millennial market.
Aided by New York food truck operators, the new offerings included things like Ginger
Boom Boom crusts and balsamic drizzles.
The result was catastrophic, with quarterly sales actually dropping by 3.5 percent.
The Motley Fool suggests that the failed rebrand might have done some lasting damage, sending
a mixed message and making customers unsure of just what Pizza Hut was trying to be and
what patrons should expect when they got there.
Are they a gourmet pizza place?
A family pizza place?
A place to call for takeout and delivery?
Meanwhile, Domino's went straight at the millennial market with things like an advertising campaign
that made fun of their own pizza and promised to do better, a super user-friendly app, and
a pizza tracker.
In other words, things that actually appealed to millennials.
But it's not just millennials who are choosing other options over Pizza Hut.
The next generation is too.
Everyone loves pizza, but who really, really loves pizza and eats of ton of it?
Students.
Unfortunately for Pizza Hut, they're not even on the radar when it comes to the student
demographic.
According to MarketWatch, part of Pizza Hut's problem is that students are preferring to
get their pizza from Papa John's and Domino's, and market analysts say Pizza Hut's recent
efforts to wade deeper into the technological world is only addressing part of the problem.
Experts from GlobalData say it's not just about technology like order-placing apps,
it's also about image and brand perception and price points — and they're just not
appealing to the student demographic the way they should be if they want to become relevant.
Pizza Hut parent company Yum!
Brands is making strong headway with their other chains.
Same-store sales at Taco Bell and KFC were on the rise, but Pizza Hut "still falls a
bit short."
The good news is that Pizza Hut knows there's a problem, and says they're willing to make
the commitment to fix things — including making sure they appeal to new customer demographics
with updated technology.
Now, for older pizza lovers, this emphasis on technology may seem weird.
You probably hear apps, trackers, drones, robots, and think…
"What the f--- does that have to do with pizza?"
"I dunno."
But it goes back to the initial problem for Pizza Hut: younger generations are eating
in instead of dining out, so it's all about the ease of the experience.
And so far, it's just a lot easier for them to get their pizza somewhere else.
It should be noted that Pizza Hut promised way back in 2015 to catch up and even surpass
the competition with new digital and technological innovations, but so far it isn't happening.
And while Pizza Hut has been busy trying to correct their menu mistakes, Domino's has
been testing driverless delivery vehicles.
When it comes to new technology, if you aren't getting ahead, you're falling behind — and
the further behind Pizza Hut gets, the harder it's going to be for them to catch up.
When Pizza Hut gave themselves that major overhaul in 2014, they made more than one
mistake.
Turning off their new target audience, millennials, was the first.
But on the flip side, they also alienated many of their longtime fans.
According to Business Insider, the overhaul scared off some of those that were already
heading to Pizza Hut, saying the menu overhaul was particularly alienating to long-time customers
and families.
"Why don't you try the buffalo sauce."
"No."
"How about premium crushed tomato?"
"One sauce!"
"Actually, there's six."
"Marinara!"
Instead of seeing sales skyrocket from new fans, Pizza Hut suddenly found themselves
needing to win back their loyal customer base.
By 2015, The Drum was reporting that they were reevaluating their market strategy to
focus on all parts of the market, not just a singular demographic.
Yum!
Brands CEO Greg Creed told investors,
"Unfortunately, we haven't been as effective as we've liked with our marketing and need
to balance its appeal to millennials with mainstream pizza customers.
We intend to do this going forward."
Now they just need to follow through.
As we've seen, most of Pizza Hut's issues have been self-inflicted.
Well, add their delivery drivers to that list, because lawsuits have cost the chain millions
of dollars just in the last few years alone.
In 2016, Pizza Hut agreed to pay out a $3.1 million settlement to drivers in Florida who
had sued the chain for consistent underpayment.
Then, in 2017, Pizza Hut settled a lawsuit brought after a 2009 accident where one of
their delivery drivers hit and seriously injured a motorcyclist, who spent months in the hospital.
The cost was $9 million.
And the bad news continued in 2018, when a Pizza Hut franchisee in Wisconsin who owned
72 Pizza Hut locations agreed to pay out $2 million to drivers who had claimed they weren't
being properly reimbursed for things like gas and maintenance on their vehicles.
Delivery might be the way of Pizza Hut's future, but it's clear they still have a lot of serious
issues to work out first.
"At Pizza Hut we get asked, do you deliver?
Yeah.
We deliver."
Quick, picture the inside of a Pizza Hut.
You're picturing those red-and-white table cloths, a Pac-Man table, and a few arcade
machines, aren't you?
That was the Pizza Hut of both the 1980s and 1990s, and it's entirely possible that your
old mental picture of Pizza Hut is a problem that could be turned into a solution.
Pizza Hut has spent years running away from their musty old image, rolling out new store
designs, new delivery options, and more.
But in 2018, Pizza Hut exec Artie Starrs told investors that the chain had done a poor job
of informing customers about all of these changes.
Despite all the updates, most people still had that same old image of Pizza Hut burned
into their minds.
In 2019, though, Pizza Hut decided on a new strategy: if you can't beat 'em, join 'em.
The idea: if people thought Pizza Hut was stuck in the past, why not play that up and
appeal to nostalgia?
The result: Pizza Hut reverted back to some of the old imagery and logos they used in
the marketing campaigns that ran from 1967 to 1999.
A huge part of that is the red roof and the shape of their building.
If you happen to drive past a place that was built as a Pizza Hut and then repurposed into
something else, you still know it was once Pizza Hut, don't you?
That's powerful stuff, and Salon says they're hoping to capitalize on nostalgia to get adults
who once ate there as children back with their own children.
Hey, at this point, anything's worth a try, right?
Check out one of our newest videos right here!
Plus, even more Mashed videos about your favorite pizza joints are coming soon.
Subscribe to our YouTube channel and hit the bell so you don't miss a single one.