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Morning Briefing for pub, restaurant and food wervice operators

Sun 27th Aug 2023 - Exclusive: Pizza Hut UK franchisee reports 16.8% lfl sales growth in 2023, ‘constructive’ refinancing talks expected to be complete by Christmas
Exclusive: Pizza Hut UK franchisee reports 16.8% lfl sales growth in 2023, ‘constructive’ refinancing talks expected to be complete by Christmas, close partnership with franchisor to reignite growth, new openings to include Itsu expansion: Pizza Hut UK franchisee Heart with Smart has reported 16.8% sales growth so far in 2023 and expects its “constructive” refinancing talks expected to be complete by Christmas, Propel has learned. The company, which is the franchisee for all the UK’s 156 Pizza Hut restaurants, reported turnover of £164,427,000 for the year ending 4 December 2022, up from £129,617,000 in 2021, while its pre-tax loss grew from £9,432,000 in 2021 to £16,481,000 (including interest and amortisation of goodwill). 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. “Our trading has improved significantly, with 16.8% growth in restaurant sales in the financial year to date (from December 2022), and 12% across the whole business,” chief executive Jens Hofma told Propel. “We are currently trading well ahead of 2019 on a like for like store basis, our restaurant profit margins are sound and in line with pre-covid. This is down to both footfall growth and pricing. We have gained momentum over the summer and had a strong summer of sales, and there is no indication this growth will reduce going forwards. There are certain scenarios you have to consider in Companies House reports, but I am pleased to say that these scenarios have not materialised. Our turnover rose 25% in 2022 and we remain optimistic, given the demand for restaurant experience remains strong, energy prices are easing and productivity initiatives and investments are gaining momentum. Our senior debt is maturing to term in April 2024 and we are in constructive discussions with our debt provider, Pricoa, who are also minority shareholders. These are normal course of business discussions about rescheduling and renewing our debt which we hope to be complete by Christmas. Prioca has been unwavering in its support through covid and since the pandemic. Our operating result of minus £3m for 2022 is understandable and marginal when you consider the impact of Omicrom in the early part of the year, followed by utility bill rises and other cost pressures – many operators are facing issues with profitability.” Heart with Smart Group has also been a franchisee of Itsu since 2021 and has made five openings so far under the healthy Asian food chain. Hofma said its pipeline of openings include both Pizza Hut and Itsu, and that it is becoming a “more concrete pipeline given our solid financial situation”. He added: “We expect to open an Itsu in Liverpool this year or next, and in Glasgow in 2024. Our Itsu restaurants in Edinburgh and Aberdeen have exceeded all expectations, in areas we weren’t expecting to do as well as we have. Scotland and the north west are definitely ready for Itsu.” Hofma also said Heart with Smart is looking to bring other new brands into its stable, but nothing is concrete yet as it looks to “focus on growing Pizza Hut and Itsu”. He added that the group is looking to “work closer in partnership” with Yum! Brands, which is also responsible for Pizza Hut’s delivery operations in the UK, for a “more effective leverage of the brands” which will in turn “unlock growth potential”. 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 to upgrade your subscription.

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