QSR August 2022

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ery as a service into its point-of-sale—a change that led to accelerated system adoption, Gibbs added, and Pizza Hut’s ability to leverage third-party aggregators to augment its own delivery fleet. The chain noted third party drivers during peak periods would help Pizza Hut address challenges. Also, “it’s part of our strategy for wanting to be ubiquitous, be everywhere that our cus tomers want to do business with us,” CFO Turner said. One franchisee who moved to aggregator platforms, the company said, was running about 4 points ahead of the system on the top line, mainly driven by incre mental customers the operator found through those marketplaces. Pizza Hut is also piloting its Dragontail platform in more than 100 U.S. stores. The end-to-end AI-based solu tion automates kitchen flow combined with the process of dispatching drivers. KFC’s international strength is well-documented— 22,981 of its 26,934 restaurants are outside the U.S. But 2021 marked a domestic turning point. KFC achieved its first net new unit positive run in 17 years, and chief development officer Brian Cahoe expects the chain to do it again this year. As sizable as KFC is, especially from a brand equity standpoint, it actually possesses a long runway for growth. Back in 2000, there were 5,364 KFCs in the U.S. The figure started to fall from 2010–2011, when KFC’s sys tem retracted by 388 locations. It would drop by at least 100 units for the next six years, going from 4,780 to 4,109. And then, a comeback plan centered on the “Re-Colonel ization” of the brand, flipped on. Closures slowed to 58, 35, and nine, before 122 in COVID’s first year. As noted, the number jumped into the green for 2021. So just getting back to where it was would signal major expansion in the coming years. In domestic markets, KFC’s same-store sales grew 12 percent in Q4 and 13 percent for 2021, both on a two-year basis. Sales were driven by group occasions, digital growth, and the brand’s rising chicken sandwich. The menu innovation mixed 9 percent in Q4, up from 1 percent last year. Mean while, comps at international markets lifted 3 percent in 14 KFC

KFC’s former U.S. president Kevin Hochman (he headed over to Brinker International in May to suc ceed retiring Wyman Roberts as CEO), along with current Pizza Hut U.S. president David Graves, spear headed the chain’s repositioning. It started by asking, “when we were at our best, why was this brand so spe cial?” And the result, in addition to moving away from a heavy dine-in footprint, was to launch a “Newstalgia” campaign focused on recognizable and differentiated products, as well as messaging and branding relevant and memorable across generations (think Pac-Man aug mented reality). Also, the introduction of pickup windows in “Hut Lane” models—late March—that essentially sprung up in 1,500 locations overnight. The reason this was feasi ble now compared to pre-COVID, was the fact stores were digitally enabled so customers could simply access the feature through the ease of their preferred devices. Pizza Hut had, in fact, drive-thru windows scattered through out the system. They didn’t do much business, though, since guests weren’t digitally connected. Contactless curbside—which Pizza Hut raced ahead of the pack on in mid-April 2020—uncovered the opportunity and intro duced guests to new channels. Pizza Hut expects close to all of its new non-inline builds to include Hut Lanes. On the culinary side, hallmark innovations became the staple. Detroit Style Pizza, an early 2021 LTO, sold out in a couple of weeks. In May, the company entered the Metaverse. During ComplexLand in late May (a virtual curated shopping experience), Pizza Hut met pizza lov ers with custom designed delivery vehicles and drivers, nine NFTs, and the chance to win free pizza for a year. Labor challenges have surged of late, however, which is not unique to Pizza Hut but a challenge facing the category as a whole in regard to delivery drivers. The chain’s U.S. same-store sales declined 6 percent in Q1 2022 with flat unit growth. CEO Gibbs said consumer demand was strong, but the brand experienced soft ness through the delivery channel, where capacity constraints limited ability to meet orders. In response, Pizza Hut completed integration of deliv

PIZZA HUT GUESTS ARE EMBRACING ITS

OLD-IS-NEW APPROACH.

KFC’S CRYSTAL BUCKET STORE IN PAINTED POST, NEW YORK, IS ONE OF ITS MOST STUNNING.

PIZZA HUT

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AUGUST 2022 | QSR | www.qsrmagazine.com