Inside Flynn’s Pizza Hut acquisition
A chance meeting in 2022 between two business leaders was the catalyst for this deal.
A chance meeting at a conference in San Francisco Bay Area between two business leaders was the catalyst for one of the biggest deals in Australia.
That deal was the acquisition of Pizza Hut Australia by US-based restaurant operator Flynn Restaurant Group.
“We were in the San Francisco Bay Area, basically a technologist summit about how the industry was going to change over the next decade looking at Metaverse, drone delivery, and all that. Phil (Reed) and I were sitting next to each other at lunch and we were just doing introductions and I said ‘Tell me about your business’. And he told me this story of a remarkable recovery that he and the Pizza Hut team led and it piqued my interest tremendously. And he ended the conversation with ‘By the way, we may be for sale’,” Ron Bellamy, co-Chief Operating Officer at Flynn Restaurant Group told QSR Media in an exclusive interview.
“We met and had that initial discussion during an activity that involved a lot of bits of paper and colour and tinsel. It was a great conversation that carried over to the bar,” Pizza Hut CEO Phil Reed recalled. They exchange numbers and it grew from there. Phil said he remembers it being quite candid.
The story that Phil told Ron was how under his leadership and Pizza Hut’s dedicated management team, he managed to execute a turnaround that transformed Pizza Hut as one of the fastest-growing QSR brands in Australia with 51 consecutive months of same-store sales growth, delivering $288m in network sales as of May.
First international investment
The deal marks a first for Flynn. According to Ron, the group has been thinking about how to grow their business for a while now.
Flynn Restaurant Group has a portfolio of over 2,350 restaurants, including 926 Pizza Huts as well as 441 Applebee’s, 379 Arby’s, 282 Taco Bells, 192 Wendy’s and 130 Panera Bakery Cafes.
“We've, we've had the good fortune to grow domestically within the US at 30% a year for the last 25 years. But at some point in time, it starts to become a little bit cramped within one country, and we had to figure out how are we going to continue to grow,” Ron said.
After their long search for the right marriage of a brand and country, they found Pizza Hut Australia.
As to why they picked Pizza Hut, Ron said they were just a big believer in the brand. He recalled how Flynn acquired NPC International’s Pizza Hut portfolio of 937 restaurants and 194 Wendy’s in 2021. NPC had declared bankruptcy in the summer and had agreed to sell its assets in a transaction worth US$801m. The acquisition puts Flynn as one of the largest Pizza Hut franchisees
The belief in the brand and Flynn’s trust in the management team behind Pizza Hut Australia is also a sentiment that Phil shares.
"The success of the Flynn Restaurant Group is something which is very much founded on a belief in people and enabling people to be successful. That's a philosophy that I very much believe in. For example, last night, we had the Queensland franchisees together. The energy in a room when you've got 60 individual franchise partners who've been on that journey is fantastic. And it’s the belief in them and the support from the operations team in particular that’s really carried them," Phil said.
No shift in focus
Phil said the acquisition will not shift Pizza Hut’s focus, which is on their customers.
“In so many businesses, we forget the customer. And the number of times I've sat in major corporations, and they're chatting about planning and talking about market share, and the word customer is not used. And it's front and centre with the Flynn Restaurant Group which is fabulous,” Phil said.
Ron echoed this statement as he sees no significant change in how the brand will operate moving forward as Pizza Hut's team has already proven themselves through one trial after another.
“For us, it’s all about how we can help the local team and Phil continue the journey they are already on. That is definitely an investment when it comes to capital, it's an investment when it comes to resources. And hopefully, we've got some capabilities and a little bit of expertise based on what we've done and been successful with that is also helpful along the way. But you know, it would be such a huge mistake for us to come in with a high degree of hubris and say, ‘Hey, we've been really successful in the US. We think we know better,’ we don't know better. We need a very highly capable, phenomenal team to be successful. And I 100% believe we have that.” Ron said.
