Pizza Hut’s future in doubt as debt crisis looms: Pizza Hut’s UK restaurant business has plunged into a debt crisis as it grapples with the fallout from soaring inflation. The US giant’s biggest British franchise, with more than 4,000 workers in 152 outlets, is locked in tense negotiations to refinance tens of millions of pounds due to be repaid to lenders in April, The Times reports. Bosses have been forced to seek revised terms on its debt this year as soaring prices pushed the company further into losses in 2022, despite benefiting from the relaxation of covid restrictions. Auditor PwC warned in accounts published by operator Heart With Smart that Pizza Hut UK faced a “material uncertainty which may cast significant doubt about the... ability to continue as a going concern”. Earlier this year, Pizza Hut’s lender relaxed the group’s banking covenants as bosses at the chain struggled with “the unprecedented inflationary pressures which emerged in 2022”, the company said. Despite this, under its going concern, Pizza Hut’s restaurant arm warned that it could yet breach its covenants in the final three months of this year in a “severe but plausible downside scenario”, in which a breach would be expected in the fourth quarter of 2023. Pizza Hut must repay £31m of its £73m of debts in April 2024. The group said it enjoys “excellent relationships” with its lenders, some of whom are equity shareholders, and the directors anticipate any potential breach “could be waived in advance of occurring”. However, failure to do this would result in a technical breach of the lending agreements. The group also said its directors considered a scenario whereby guests demand declines sharply in the summer of 2023, reaching a low point in October, before recovering by the summer of 2024. This would see discretionary spending significantly tightened and liquidity significantly reduced, and would see at least two planned development projects delayed until later in 2024. Pizza Hut launched in the UK in 1973 with a restaurant in Islington, north London. At its height of popularity in the 1980s, it was opening an average of one restaurant a week in the UK. In 2012, the brand’s US owner Yum! Brands — formerly PepsiCo’s restaurant arm — sold the UK restaurants franchise to private equity group Rutland Partners. Yum!, which is listed on the New York Stock Exchange, also owns the KFC and Taco Bell brands. Jens Hofma, who has run Pizza Hut UK’s operations for nearly a decade and a half, led a management buyout from Rutland in 2018 in a deal worth a reported £100m. The takeaway outlets are run separately by individual franchisees, and when these are included, the business employs 12,000 people at 500 sites. Hofma was backed by Pricoa, a subsidiary of The Prudential Insurance Company of America, which remains Pizza Hut UK’s main lender. Pizza Hut UK’s debt attracts interest payments of up to 14%. The business has been loss-making at operating basis for the last two years and was £16.5m in the red in the year to December 2022. Despite this, the business said it is looking to reignite its growth and had a new store development pipeline, and is seeking additional brand partners following a successful link-up with Itsu. “Our Pizza Hut business has fully transitioned to a more contemporary fast casual guest experience and menu, unlocking capacity and driving footfall back into our existing Pizza Hut estate,” director Andrew Platt said in his statement accompanying the accounts. “Our legendary lunchtime buffet offer now extends into the weekend. Alongside our great value deals, this offers guests even more choice and value throughout the week and is proving hugely popular during the cost-of-living crisis. We will continue to innovate and develop our buffet offer with focus and energy in 2023. Our takeaway and aggregator delivery sales layers are now fundamental parts of the business model, accounting for more than 20% of sales. We continue to build on this success by pursuing competitive pricing, relevant customer communication and a frictionless guest experience. We have completed the reframing of our business as one of the largest and most professional restaurant franchisees in the UK. We have developed a strong and very exciting partnership with Itsu, and at the time of writing, have opened five Itsu shops under franchise. Two of these were conversions of former Pizza Hut restaurants. We anticipate a minimum of a further two to three openings in 2024. We are actively seeking additional brand partners with whom we can marry our operational expertise and comprehensive infrastructure to develop further sites and build brands across the UK.” The group reported turnover of £164,427,000 for the year ending 4 December 2022, up from £129,617,000 in 2021. Its pre-tax loss grew from £9,432,000 in 2021 to £16,481,000. This compares to turnover of £210,990,000 and a pre-tax loss of £20,160,000 in the last full year before the pandemic, ending 1 December 2019. During the year, in September 2022, the business exited the Company Voluntary Arrangement (CVA) it entered into in September 2020 due to the impact of covid. “The group engaged successfully with landlords to agree mutually agreeable lease terms on many sites well in advance of the end of the CVA period,” it said. “At the balance sheet date, the group was operating 156 sites, of which only 17 had short-term or temporary lease agreements. As the group continue to recover financial strength, we remain engaged with landlords regarding our future growth strategy and the opportunities this strategy presents.” The group’s cash balance at year end was £9,270,000 (2021: £15,657,000) while trading Ebitda was £4,975,000 (2021: £9,526,000). It received no government grants (2021: £18,935,000). Heart With Smart Group is included in the new Propel UK Food and Beverage Franchisee Database – the first time that profiles of 100 of the top food and beverage franchisees have been available in one place in the UK. The go-to database, which features many of the big franchise operators running Costa Coffee, McDonald’s and Domino’s sites, was sent out to Premium subscribers for the first time this month. It brings together a wealth of information on an increasingly important part of the market, and the first edition features more than 32,000 words of content. The sixth major database exclusive to Premium subscribers, it will be sent out bi-monthly, including new entries and updates to existing entries. The companies, listed in alphabetical order, have their most recent results reported as well as broader information around the company’s background, site numbers and board make-up. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £995 plus VAT – whether they are an operator or a supplier. The single subscription rate is £495 plus VAT for operators and £595 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. 

Dishroom forecasts return to pre-pandemic levels of profit in 2023, looking to open more restaurants: Indian restaurant group said it has forecast returning to pre-pandemic levels of profit in 2023 and is also looking at more restaurant openings. In accounts filed with Companies House for the year ending 1 January 2023, Dishoom revealed it took in £94,978,000 worth of revenue, almost twice as much as in 2021 (£57,654,000), when restaurants were still closed because of pandemic-era measures for much of the year. That helped it post profits of £4,778,000, up from £1,505,000 last year. Profit margins, though, were still below pre-pandemic levels, but despite the impact of inflation on the hospitality sector, the chain said it expected to see 2019-level margins this year. In the year to 20 December 2019, Dishroom reported turnover of £52,919,000 and a pre-tax profit of £4,707,000. Adjusted Ebidta in 2022 was £9,407,000 compared to £4,849,000 in 2021 (2019: £6,461,000). It received no government grants (2021: £3,701,000). The profit growth allowed the restaurant to pay out a £3.7m in dividends to its parent company, Braunstone, which also owns online gift card business Touchnote. In the annual report, Dishoom said it “continues to evaluate potential new locations across the UK”. Founded in 2010, Dishoom operates nine locations across the UK, of which six are in London. Dishoom was founded by Shamil and Kavi Thakrar as well as Amar and Adarsh Radia. The Thakrars are both related to the founders of rice giant Tilda, which was previously owned by Braunstone before being sold for £250m in 2014, reports The Evening Standard.

UK consumer confidence rose more than expected in August: UK consumer confidence rose more than expected in August, helped by lower energy prices and accelerating wage growth. The consumer confidence index rose five points to minus 25, recovering most of the ground lost in July and returning to about the levels seen at the start of last year, research group GfK said. The figure was stronger than the marginal uplift to minus 29 forecast by economists polled by Reuters, reports The Financial Times. Consumer confidence “regained momentum this month”, said Joe Staton, client strategy director at GfK. “While the financial pulse of the nation is still weak, these signs of optimism are welcome during this challenging time for consumers across the UK,” he added. The figures suggest “the cost-of-living crisis is coming to an end”, said Ruth Gregory, an economist at the consultancy Capital Economics. However, she warned that “consumer confidence may deteriorate again in the coming months due to further rises in unemployment, falls in house prices and still rising interest rates”. The Bank of England is expected to raise interest rates in September for the 15th consecutive time since December 2021.

Study finds paper straws contain long-lasting and potentially toxic chemicals: ‘Eco-friendly’ paper straws contain long-lasting and potentially toxic chemicals, a new study has concluded. Belgian researchers tested 39 brands of straws for the group of synthetic chemicals known as poly and perfluoroalkyl substances (PFAS). These were found in the majority of the straws tested (69%) and were most common in those made from paper and bamboo. The synthetic chemicals are used to make everyday products resistant to water, heat and stains but break down very slowly over time and can persist over thousands of years in the environment. They have also been linked to a number of health problems including lower birth weight, thyroid disease, liver damage, kidney cancer and testicular cancer, reports The Daily Mail. The PFAS concentrations were low and pose a limited risk to human health but PFAS can remain in the body for many years and concentrations can build up over time. The authors advised people use stainless steel straws or avoid using straws at all. “Straws made from plant-based materials, such as paper and bamboo, are often advertised as being more sustainable and eco-friendly than those made from plastic,” said researcher Dr Thimo Groffen. “However, the presence of PFAS in these straws means that’s not necessarily true.”