Friday, May 30, 2008

Pizza Hut anyone

Pizza Hut turns 50 in tough time for the industry

LOUISVILLE, Ky. - Dan and Frank Carney borrowed $600 from their mother 50 years ago and opened a small pizzeria in Kansas using second-hand equipment in what was once a bar.

The dream was to make enough pizzas to pay for college and earn a little money on the side for the family. That humble enterprise with a humble name -- Pizza Hut -- is now the
world's largest pizza chain with $10 billion in annual sales and more
than 11,000 stores worldwide.
"We were able to build something from nothing," Dan Carney said,
recalling the hardscrabble early days and that first pizzeria in
Wichita, Kan., which opened 50 years ago Saturday.

The chain known for its red-roofed restaurants is now updating its
look, with plasma TVs, sports bars and local sports memorabilia. It's
also rolling out tubs of baked pasta and piles of fried chicken wings
to go with its famous pizzas.

It is a tough time for pizza makers, who are strapped by rising cheese
and flour costs and consumers who have been pinched by a sluggish

Last year, Pizza Hut Inc. closed more U.S. restaurants than it opened,
which it attributes to such factors as leases ending and restaurants
being sold.

Analysts say Pizza Hut was due for an overhaul the new menu may help it through a rough time for the industry.

Restaurant analyst Larry Miller with RBC Capital Markets said "the iconic red roof store is dated."

"From a bigger picture, longer-term view, this is a brand that's
starting to differentiate itself from the competition in some really
unique ways," he said.

Pizza Hut went public in 1970 and was then acquired by PepsiCo Inc.
in 1977. Frank Carney left the company three years later in a clash
with the new owners. Pizza Hut's corporate parent changed again in 1997
when PepsiCo spun off what is now Yum Brands Inc., a Louisville-based
company that also owns Taco Bell, KFC, Long John Silver's and A&W
All-American Food Restaurants.

"I'm proud every time I see Pizza Hut doing well because that's part of me," said Frank Carney.

Now 70, he is a competitor with a stake in 73 Papa John's pizza stores in Wichita, Houston and Hawaii.

"Good competition keeps everybody on their toes, them and us," Carney said.

Pizza Hut began an aggressive advertising campaign this spring to
publicize the new menu. It says the effort paid off in the first month,
when it sold 2 million pans of pasta, doubling its expectation, said
Pizza Hut President Scott Bergren.

The company sells chicken wings in an agreement with WingStreet.

"We have changed our sales mix substantially," Bergren said.

Bergren declined to say what kind of profit margins the company was
seeing for pasta and chicken wings compared with pizza, saying, "these
are all profitable products." Ingredient costs like wheat, cheese and
chicken have soared in the past year.

Bill Walsh,
a Pizza Hut franchisee with a stake in 93 stores in a dozen states,
said the menu has bolstered sales at his restaurants. While restaurants
have incurred higher costs and extra equipment expenses, "by the time
you get those additional sales, we're happy to accept that higher food

Pizza Hut is quick to emphasize that it will stay true to its name.

"Our core, and Lord knows we sell more of it than anybody in the United States, it's always going to be pizza," Bergren said.

While the chain's most heated growth is now overseas, Bergen said there is room to expand at home.

"We think there are another 1,000 towns in the United States where we
can actually build a Pizza Hut," he said. "So we're not done growing in
the United States at all."

Dan Carney, 76, has left the pizza business but still keeps an eye on
the company he founded 50 years ago in a rented bar with his brother.

"I'd love to see it go another 50 years," Carney said. "As long as they
stay dynamic with new ideas flowing in and out, they have a great
chance to do that."


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