Private equity firm Directional Capital in talks to acquire Pizza Hut’s biggest UK restaurant franchisee: Pizza Hut’s biggest UK restaurant franchisee is closing in on a rescue deal that would salvage the vast majority of its circa 140 sites and jobs. Sky News reports that Directional Capital, an investment firm which already controls much of Pizza Hut’s dine-in operations in Denmark and Sweden, is in advanced talks to acquire the Jens Hofma-led Heart With Smart (HWS) business. A deal would be structured as an acquisition of HWS by Directional Capital. Sources said there is a strong possibility the transaction would be implemented through a pre-pack administration of HWS, but that would not lead to substantial numbers of site closures or job losses. Only a handful or so of the chain’s existing outlets at most were at risk of being axed, they said. Earlier this summer, Directional Capital acquired NRG Pizza, which owns the rights to operate Pizza Hut in Sweden. It is also understood to own two of Pizza Hut’s UK delivery franchisees. In November, Sky News reported that HWS had begun approaching potential bidders as it sought to mitigate the impact of tax hikes announced in the previous month’s Budget. HWS is working with Interpath Advisory on the process. HWS, which was previously called Pizza Hut Restaurants, employs about 3,000 people. It is owned by a combination of Pricoa and the company’s management, led by chief executive Hofma. They led a management buyout reportedly worth £100m in 2018, with the business having previously been owned by private equity firm Rutland Partners. HWS licences the Pizza Hut name from Yum! Brands. It is thought that increases to the national living wage and employers’ national insurance contributions unveiled in the Budget by chancellor Rachel Reeves would add approximately £4m to HWS’ annual costs – equivalent to more than half of last year’s Ebitda. HWS operates all of Pizza Hut’s dine-in restaurants in Britain but has no involvement with its large number of delivery outlets, which are run by individual franchisees. Accounts filed at Companies House for HWS for the period from 5 December 2022 to 3 December 2023 show that it completed a restructuring of its debt under which its lenders agreed to suspend repayments of some of its borrowings until November next year. The terms of the same facilities were also extended to September 2027, while it also signed a new ten-year Pizza Hut franchise agreement with Yum! Brands, which expires in 2032. Pizza Hut opened its first UK restaurant in the early 1970s. In 2020, the company announced it was closing dozens of restaurants, with the loss of hundreds of jobs, through a company voluntary arrangement. At that time, it operated more than 240 sites across the UK. Pizza Hut features in the Propel 500 report, an unparalleled resource that profiles the UK’s leading hospitality operators ranked by turnover – which is available now. This comprehensive report provides more than 90,000 words of analysis, delving into company histories, leadership structures, site numbers and financial performance, making it an essential resource for industry professionals. A list of the operators included can be discovered now by visiting the Propel 500 page on Propel’s website. The guide is delivered in two parts: an introductory PDF, featuring deep dives into the top 25 companies and 6,500 words of insight from Propel’s expert writers, and a fully searchable Excel sheet, offering easy access to all the data. Key highlights include Mark Wingett’s exploration of mergers and acquisitions shaping the Top 500’s future, Tim Street’s view of the UK’s franchise market, and Phil Pemberton’s insights into experiential leisure as a hospitality cornerstone. Katherine Doggrell examines developments in UK hotels, while Mark Bentley, business development director at HDI, identifies emerging growth sectors, and Maria Vanifatova, founder of Meaningful Vision, analyses trends in QSRs. Propel 500 is available now for £595 plus VAT. Existing Premium Club members can purchase it for £395 plus VAT. Premium Club members will receive the report for free on Friday, 28 February at 9am. Order the Propel 500 report today by emailing: kai.kirkman@propelinfo.com.