Pizza Hut Restaurants was subject to a management buy-out last year, led by CEO Jens Hofma. Speaking at MCA’s Restaurant Conference, he discusses the problems with fast rollouts, how it is possible to over-innovate, and why the customer is not always right.

Do fast rollouts work beyond Excel spreadsheets?

Most of us know why the answer is no. The moment you start accelerating rollouts unreasonably you inevitably make the wrong decisions on sites, overstretch people capacity and execution starts to suffer. There’s no learning feedback loop where you improve as you roll out, because you’re breathlessly pursuing new openings. The larger you get, the more you become a hamster wheel.

The other side of this argument is, I haven’t met too many patient investors out there, who want to take things step by step.

As restaurant operators, we are under huge pressure to perform, and one of the easiest ways to do this in the short term is with a store opening programme.

New store openings become tricky if they start to become a cover for weak underlying performance of estate

In the early 2000s, Pizza Hut was opening aggressively, in all the new retail parks. Sales and profit growth looked very attractive. However, digging underneath at like for like performance, the initial signs of weaknesses were starting to show

Even more important is like for like profit growth - whether the health of the core business is there or not.

When you get into a rapid rollout phase, always keep an eye on the underlying performance. Are you doing enough to drive organic growth, keeping the concept fresh and exciting?

Are your financials as robust as you think they are?

With an influx of private equity money in the industry, many colleagues talk about multiples, EBITDA, leverage.

At the core, the P&L of a restaurant business is a fragile and tempestuous thing. It tends to be highly operationally leveraged. It has high fixed costs. Whenever there’s a slight downturn in sales it has a big impact on profits.

The costs of our business are not immediately obvious, such as with refurbishment cycles. Does the P&L reflect the fact every 5-10 years we need to find a massive amount of money to keep our restaurants fresh, innovative and new?

How do you make sure these financial reserves are being built into the business during the good times, so you can be prepared for the not so good times.

Being all over that P&L, make sure you invest in the good times to prepare for the bad times.

Can you ever over innovate?

What I’ve come to learn, is to execute consistently at restaurant level is enormously challenging. How do you make sure you give that consistent experience shift after shift day after day?

Three years ago, we implemented a system, which reviewed 220 practices in our restaurants on a quarterly basis. We’ve never had more data about our execution in Pizza Hut – and one thing it taught me is that any change takes far longer to embed and sink in than I ever thought before.

As a result, a lot of changes and innovation are much slower than they used to be – however they are much more thorough, with real change that’s noticeable by our guests. Being realistic about the change your system can absorb is crucial. It’s dangerous when innovation is decoupled from day to day running of the business. As is the case when innovation is done at the top level, and the execution is left to others. If not properly executed it can land badly.

Is the customer always right?

I’ve been very confused about this over many years. What the customer can’t really tell you is what you should be.

At Pizza Hut we took the wrong way in the early 2000s. We saw the market going in the way of a more authentic Italian, artisanal, thin-crust, stone-baked pizza. Pizza Express ran away with the market, and we felt like we needed to become more like them.

We started to sell thin pizzas with artisanal toppings. Team members were explaining they were a bit like Pizza Express. You imagine where that leads – you lose market leadership, authenticity, and specialness as a brand.

Now we’re unashamedly American – not Italian, not authentic, not artisanal. It’s fun, indulgent pizza, which you love for what it is.

You need to be able to filter through the feedback, so you pick up points that are relevant - but don’t stray away from your core offering.