The struggling Pizza Hut brand is planning a major fightback against market leader Domino’s after a trio of private equity-backed Australian fast food execs bought the licence as well as the failed Eagle Boys pizza chain.
The Eagle Boys group, with 114 stores, slipped into voluntary administration in July, following a failed bid to take the business to an IPO by Queensland private equity firm NBC Capital.
Now the Eagle Boys name will disappear 30 years after it was founded, as its new owners convert those stores to the Pizza Hut brand.
Australian private equity business Allegro, took control of the Australian licence for Pizza Hut in September, installing three former McDonald’s executives, Peter Rodwell, Lisa Ransom and Chris Leslie, as the pizza chain’s senior management, has struck a deal with Eagle Boys administrators SV Partners, the company announced today. Pizza Hut Australia did not disclose what it paid for the brand, saying it was commercial in confidence.
Allegro will likely push for an IPO in the next few years as it seeks to revive the Pizza Hut brand under Australian ownership.
This chart from Roy Morgan research, released four months ago, shows how tough things have been for Pizza Hut and Eagle Boys in recent years.
Pizza Hut shed a quarter of its customer base to 745,000 over four years, while Eagle Boys went over a cliff.
But Pizza Hut CEO Lisa Ransom announced the fightback today as the company looks to rebrand 50 Eagle Boys stores as Pizza Hut over summer.
Pizza Hut currently has 270 stores and just under a quarter of the market, so the takeover will boost it to 320 outlets, its biggest-ever network in Australia. The first store to switch to opened on Sydney’s northern beaches today after seven years under the Eagle Boys brand.
Ransom, a 20-year veteran of McDonald’s in the Asia-Pacific region and VP of marketing before swapping burgers for pizza, told Business Insider she believed pizza fans were passionate about seeing the nearly 60-year-old brand make a comeback.
“It’s brand with a wonderful heritage and great qualities,” she said.
She expects the first half of the conversions to be completed by Christmas, and the remainder in January, with Western Australia the top priority, followed by South Australia, Northern Territory, regional NSW and Queensland.
The company is still in negotiations with the 60-odd outstanding franchisees about their future. Some will be lost because they’re adjacent to existing Pizza Hut stores, and Ransom suspects others will exit, weary of the travails of recent years. But Ransom says she doesn’t have a specific end point in mind.
“There will come a tipping point where there are simply not enough operating as Eagle Boys for it to be a sustainable model and we’ll be working with the individual franchisees on that,” she said.
The company is also investing in new equity stores and next month will resurrect a previously closed store also on the northern beaches at Newport.
“We’ve got skin in the game now and Newport is the perfect place for us to open our store in time for a fantastic summer ahead,” she said.
While the business will remain predominantly franchise-based, Ransom says having “a decent chunk” of their own stores gives them the chance to experiment.
“The model means you can test things and learn a lot more about the business,” she said.
“It’s always good to have your own patch of stores so you can try some things that might seem to be a bit riskier, and it’s also important because then the franchisees know that you know what they’re going through on an everyday basis. It builds rapport.”
Ransom won’t be drawn on future expansion plans and their pace, but says: “there are areas where we’re not operating and we know that we need to be there because the customer demand is there”.
One idea being floated is bringing back the restaurants that were once part of the Pizza Hut experience in the 1970s and early ’80s – ground since ceded to artisan pizza makers.
But she’s conscious that market carved out by Domino’s has been based around tech and is keen to improve Pizza Hut’s digital capabilities.
“It’s about being in places customers want you to be and being accessible to them in the ways they want you be accessible,” she said.
“The team is gearing up and we will now start hunting.”