Pizza Hut’s ambitious goal to be number one
Pizza Hut Australia has a simple goal – to become the number one pizza brand in Australia by market share.
This is a highly competitive market in which major rival Domino’s has taken the lead through innovation and investment into technology, but the team behind Pizza Hut – management, franchisees and Allegro, the private equity firm invested in its success – are confident of, and committed to, achieving the target.
CEO Phil Reed and Allegro Funds’ investment manager Jeremy Trouncer spoke with Inside Franchise Business Executive about the challenge.
Four years ago Allegro founder Chester Moynihan highlighted increased investment, resources and management focus for the pizza brand.
Jeremy Trouncer says investment in tech and operations is focused on training, product quality, management team, head office capability, customer ordering and the ordering experience. And it’s paying off.
“Over the last 24 months we’ve seen really strong momentum in terms of trading,” he says.
“It’s an exciting time, the management team has done a great job. Franchisee engagement is now much stronger, customer metrics are moving in a positive direction.”
Expect to see more product innovations and partnerships with complementary food and beverage brands, he says.
Just recently Pizza Hut revealed its move into kiosks through a franchise arrangement with Euro Garages. This comes after an impressive year which ended with 30 per cent same-store-sales growth in December.
Phil Reed says the great result is due to a combination of elements.
Pizza Hut’s impressive year
“Coming into the business, we worked very hard on customer experience, driving the relevance of the brand, the standard of operations, technical capability, and working for and in partnership with franchise partners. All of those things blended which enabled us to drive significant growth.”
He points to the robust nature of the tech capabilities citing a promotion last year celebrating the brand’s 50th anniversary in which 14,000 transactions were completed in just one minute.
To the mix for success add great marketing, quality of operation and good customer experience. Then of course, there is the food.
“The quality of the food is the first thing. Now franchisees love the dough, they spend time enuring it is proofed correctly. With dough it’s not just functional – the better and more care that is taken, the better it is. That’s the art.
“From the science, new kitchen management and delivery systems mean things are perfectly timed, the pizza comes out just as the delivery driver is ready. All of that is now optimised using tech.”
Customers can also track the progress of their order.
“In terms of global tech we’re first class,” says Reed. He points to 60 per cent of customers rating the brand a top performer as an example of great customer experience achieved.
“We’ve been building capability and capacity as we seek to transform, the critical path includes supporting and engaging franchise partners, they are enjoying a significant increase in cashflow, profit is increasing.”
Pizza Hut has seen demand for delivery and the digital platform increase and many Aussie customers who had strayed from the brand have come back to the website and found it offers what they want in customer experience, he says.
“We have used Dougie the delivery driver from years past, he’s the original pizza guy. For many of our customers this is the first place they ever tried pizza and that emotional link has been very very strong.”
Every brand faced challenges with the pandemic, and Reed is happy that Pizza Hut was able to switch up swiftly, claiming the brand was the first to introduce contactless delivery.
Marketing, operations, and the tech team were able to plan and implement rapidly – within six hours, he reports.
Grab ‘n’ go concept goes live
“Our owners Allegro have been instrumental and extremely supportive in the turnaround and strategic advice during Covid. They are great thought partners, and helped us prioritise action and focus. That’s what has led to Euro Garages.”
The grab-n-go concept which is trialling now in three of the group’s 530 service stations, created a whole new Pizza Hut concept.
“It’s a test, if it works, fabulous. If not, we fail fast and move on,” says Reed.
He describes it as a tactical route for franchisees who work in partnership with the Euro Garages pilot in their area – it’s not a competing business.
“If it is successful look to find more opportunities, for instance in stadia, close to popular beachside locations.”
Pizza Hut’s growth plan
With only 55 per cent of Australian consumers close to a Pizza Hut store there is still more than enough room to grow. Initially this is through the so-called ‘delco’ outlets – delivery and carry out stores.
“We are probably one of the last big QSR brands that has the opportunity to grow and that will be determined by finding the right locations and trade zones.”
While Reed admits Australia can be challenging because of operational costs there could be opportunities to return to the dine-in model, he suggests. But right now the tough rental costs means the business is focusing on winning where it can, with a smaller footprint.
“We would like to support our existing franchisees. They have been through a great deal in the past few years and I hope our team has bought them success. We hope to continue in that vein.
“Franchisees have supported the brand and we’d love to help them to expand their businesses further. I think our focus has to be giving further growth opportunities to existing franchisees.”
Reed points to a robust supply chain supported by supplier partners as integral to the brand’s success.
Surprisingly, Pizza Hut is now the biggest chicken wing distributor, says Reed, which has gone from a standing start a couple of years ago to more than 15 million wings.
Further menu innovations need to fit in operational criteria, and not introduce complexity to the process.
“We are absolutely focused on delivering 100 per cent customer experience,” says Reed.
“I want 2021 to be a record year – we have a winning culture and team – not only through same store sales growth, but also opening new restaurants and bringing the brand to more people.
“Realistically there is a lot of opportunity, I want to open as many as possible. Over the past two to three years, we’ve been planning, so realistically this is a standing start. There is a lot of potential.
“Where we performed last year – 91 per cent of franchisees enjoyed trading with positive growth, 73 per cent had their highest ever trading day in 2020.
“In terms of volume, records were broken there too. Franchisees had a very successful year.”