The biggest franchisee of Pizza Hut and Wendy’s locations struck a deal to sell its assets to several new companies, a move expected to affect more than 1,300 fast food restaurants nationwide that illustrates the property ownership shift stemming from fewer diners in the pandemic.
NPC International, based in Leawood, Kansas, has been moving through the Chapter 11 bankruptcy process since July and trying to find buyers for its hundreds of Wendy’s and Pizza Hut locations across the country. The franchisee said Thursday it now expects to sell its Pizza Hut portfolio and about half its Wendy’s locations to Flynn Restaurant Group, with the remaining Wendy’s being bought by a group of five franchisees backed by the parent company of Wendy’s.
NPC International struck a deal for Flynn Restaurant Group to become the stalking horse bidder to set a threshold offer for all its locations but Wendy’s parent company, Wendy’s International LLC, objected because it was concerned Flynn Restaurant Group was a rival business. San Francisco-based Flynn Restaurant Group operates more than 1,200 Applebee’s, Taco Bell, Panera Bread and Arby’s locations.
As a result, that initial deal, valued at $816 million, was called off and reduced. A new arrangement is now in place in which Flynn Restaurant Group is buying all of NPC International’s remaining 925 Pizza Hut locations and about half, or 200 restaurants, of its Wendy’s portfolio for $552.25 million plus another $8 million for other fees, according to court documents filed Thursday.
The pandemic has hurt overall restaurant demand because of dining room capacity restrictions and a reluctance by customers to head out to eat. Eateries across America have been trying to rely more on takeout and drive-thru orders than sit-down business. Large retail chains of all kinds have also looked to reduce the number of properties on which they must pay rent.
Flynn Restaurant Group has a “proven track record of running great restaurants and driving growth, and we are confident that they are fully committed to growing the Wendy’s brand,” a spokeswoman for Wendy’s International LLC said in an email.
A group of Wendy’s franchisees from Pennsylvania, North Carolina and the greater Kansas City area are buying NPC International’s remaining Wendy’s locations, about 193 restaurants, for $248.25 million, according to court filings. Wendy’s International LLC, based in Dublin, Ohio, has already preapproved the five franchisees to operate the locations, according to a filing with the Securities and Exchange Commission.
Both deals still have to be finalized in a Jan. 15 bankruptcy court sale hearing and, if approved, they are expected to close by the second quarter. NPC International declined to provide a list of addresses of locations involved in the deals.
The franchisees represent four regional markets. In Greensboro, North Carolina, Schmidt Family Restaurant Group will operate about 25 locations and Superior Restaurant Group will operate another 25 locations. About 76 miles away in Raleigh, North Carolina, Delight Restaurant Group will operate 54 Wendy’s restaurants. In the greater Kansas City area, Legacy Restaurant Group is expected to operate 35 Wendy’s locations. In Pennsylvania, Yellow Cap Holdings will operate 54 restaurants. The consortium of franchisees has agreed to offer jobs to all of NPC International’s existing employees, according to a Thursday press release.
NPC International has rejected about 134 leases tied to Pizza Hut locations across the country and expects to abandon those properties, according to court documents. It was not immediately clear if those rejected leases were included in the deal with Flynn Restaurant Group or if they were part of the 300 locations the company previously announced it planned to close.
The closings had to be approved by Pizza Hut’s corporate owner Yum! Brands, a fast food chain based in Louisville, Kentucky, that is the parent company of Pizza Hut Inc., a subsidiary based in Plano, Texas.
More than half of the Pizza Hut locations expected to close were focused on sit-down, dine-in operations, said David Gibbs, Yum! Brands CEO, in an Oct. 30 earnings call with investors. Pizza Hut has been shifting to so-called express units that emphasize faster pickup and takeout.
NPC International previously hired real estate adviser A&G Real Estate Partners to market 163 leases for sale. It was not immediately clear which or how many of those leases have actually sold. A&G Real Estate Partners could not immediately be reached for comment.