Steve Gotham: New tricks at old dog Pizza Hut Restaurants?

A little over a year ago the senior management team at Pizza Hut Restaurants completed their management buy-out from its previous private equity backer, Rutland Partners. Longstanding CEO, Jens Hofma, led the deal and proudly reiterated that the underlying fundamental mission of the business would not change, with its aim to be the most loved place to eat and work. Using key consumer insights from MCA’s Eating Out Panel, to what extent are UK customers feeling and acknowledging the love?

At the time of the buy-out in April last year, the business operated 260 restaurants, a figure which has since been trimmed slightly to 253 outlets. This compares with the 307 sites operated back in 2014. These physical portfolio reductions are worthy of mention as they will have an influence on consumers’ brand awareness and consideration perceptions. Indeed, MCA’s tracking of these over the year to June 2019 versus June 2018 shows a decline in both.

Left unaddressed, these declining trends clearly have the potential to become problematical. The acid test, however, lies with footfall through the door and the nature of the experiences received. Encouragingly, here the results are far more positive. Looked at in terms of share of visits to chain restaurants, Pizza Hut is seeing an annual rise from 6% to 7% at lunch, and from 7% to 8% at dinner. By comparison, this compares with some flat-lining at Pizza Express.

Focusing on the more important dinner day-part, we are seeing average spend per head rise by 5% to £18.50. While this spend might be below the £20 level seen across the chain restaurant channel on average and at Pizza Express, it is worth pointing out that the 5% increase exceeds the far more modest rises seen across the channel and at its more upmarket rival.

It is also encouraging to report an increase in Pizza Hut’s Net Promoter Score, up from 30 to 32 over the comparative period. However, with 32 still below the levels achieved across the channel and at Pizza Express specifically, there is certainly further room for improvement. Looking at some of the factors behind why the NPS rating has increased, it is useful to review more specific consumer assessments on the food quality, customer service and value for money received.

Again, focusing on dinner, perceptions of the food quality at Pizza Hut have not changed over the 2018/19 period compared with 2017/18. However, at 8.5 out of 10, they remain on a par with the wider channel and Pizza Express. More progress has been made on both the friendliness of the customer service and the value for money fronts. Just maybe, more staff are feeling more of the new ownership love/incentivisation and are passing this onto customers. The 8.5 rating for service, up from 8.2, is a significant increase and now exceeds the chain restaurant channel average. Value for money ratings are also up, which will in part reflect some greater attention on pricing and promotional activity.

Overall, MCA’s consumer research finds evidence of several signs of positive momentum within the Pizza Hut restaurant business. It is a brand that has been around for a considerable period, tracing its UK origins back to the early 1970s. It also has a management team that has amassed considerable experience within the business and who seemingly, are putting this and a few new initiatives, to good use. Indeed, I am tempted to politely conclude that this is a counter-proverb example of where old dogs are being taught new tricks.