Pizza Hut’s UK restaurants plot new direction in rescue deal

Pizza Hut's biggest UK restaurant franchisee is close to securing a deal that will preserve the majority of its British sites and jobs.

Sky News has learned that Directional Capital, a firm that already controls most of Pizza Hut's dine-in outlets in Denmark and Sweden, is in advanced discussions to acquire around 140 locations in the UK.

A deal, due as soon as Wednesday, would be structured as an acquisition of Heart With Smart (HWS), the main franchise holder, by Directional Capital.

Financiers stated there was a substantial likelihood the deal would be carried out through a pre-pack administration of HWS.

Money blog: Pound 'may plunge to $1.15

They pointed out nonetheless that a corporate entity going insolvent would not result in large numbers of site closures or redundancies.

It was stated that at most, just a small number of the existing outlets belonging to the chain were at risk of being closed.

HWS, which was previously called Pizza Hut Restaurants, employs around 3,000 individuals, making it one of the largest players in Britain's casual dining sector.

If completed, a deal would bring a successful conclusion to a sale process that has been underway since the aftermath of Rachel Reeves's Budget in late October.

Insiders informed Sky News in November that the planned rise in employers' national insurance contributions (NICs) set to come into force in April would add approximately £4 million to HWS's annual expenditure base - a sum equivalent to over half of last year's pre-tax earnings, excluding depreciation and amortisation.

HWS is owned by a joint partnership between Pricoa, a funding provider, and the company's leadership team, managed by chief executive Jens Hofma.

They led a management buyout reportedly worth £100 million in 2018, with the business having been previously owned by Rutland Partners, a private equity firm.

HWS - Holroyd Weiss Stores Limited, the UK operator of Pizza Hut outlets, has a licence from Yum! Brands, the major American food company which also owns KFC.

Interpath Advisory has been overseeing the sale process.

Even before the Budget, restaurant operators were under severe pressure, with TGI Fridays having gone into administration before being sold to a consortium consisting of Breal Capital and Calveton.

Sky News also reported in the autumn that Pizza Express had taken on investment bankers to provide advice on restructuring debt.

Highway West Restaurants operates all of Pizza Hut's table service restaurants in the UK, but has no involvement with its many delivery branches, which are managed by separate franchise holders.

Directional Capital is reportedly the owner of two Pizza Hut delivery franchises in the UK.

Documents lodged with Companies House for the period from December 5, 2022 to December 3, 2023 reveal that HWS4 carried out a debt restructuring deal under which its lenders consented to postponing repayments on certain borrowings until November next year.

The terms for the same facilities were also extended until September 2027, and it also entered into a new ten-year Pizza Hut franchise agreement with Yum Brands, which expires in 2032.

The market situation has actually improved a fair bit since 2022, but despite this people are continuing to face numerous challenges, including persistently high inflation rates, high mortgage payments and sluggish economic growth.

It added: "The difficulties facing business remain significant."

Pizza Hut launched its first site in the UK in the early 1970s and expanded speedily over the subsequent 15 years.

In 2020, the company declared that it was shutting several restaurants, resulting in the loss of numerous employment opportunities, through a company voluntary arrangement (CVA).

At that point in time, it operated more than 240 sites throughout the UK.

HWS and Interpath declined to comment on Monday evening. Directional Capital were unable to be contacted for a comment.

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Labour has been sucked into the WFH culture war. It should know better

Working from home two to four days a week can reduce carbon emissions by between eleven percent and twenty-nine percent.

On BBC Radio 4’s Today programme the day before yesterday, a warning was issued that the new bill would oblige businesses to let people go.

They chose to treat what appears to be a failure as a fight from the comfort of their own homes, claiming the agency's flood resilience team in Nottingham have largely moved to a work-from-home culture in recent times. Proof of this? A job advert from last month stated team members could "balance home working" with spending time in the Nottingham Trentside office. The agency was taken aback by the suggestion, and said the floods were in no way related to people working from home. "Our staff work anywhere – in the office, out on the ground, in warehouses, on quaysides, in fields and from their own homes, not just offices," it told me.

Even though working from home can potentially be detrimental to productivity, the anti-work-from-home narrative has had a strong impact on the Daily Mail, which has fiercely attacked the concept with headlines such as "Working from home makes you idle and lonely and benefits the well-to-do at the expense of ordinary workers. So why is Labour promoting a 'scrounger's charter'?" Not even the Mail's own readers, however, appear to agree with this view. When asked "Should employees who work from home receive a reduced salary?", they voted "No" by 61% to 39%.

Rees-Mogg's rule was apparently here to stay after all. Government officials are now required to spend 60% of their time in their offices. Not surprisingly, civil service unions such as the First Division Association called the figure "plucked from thin air", with no evidence to support it and lacking any flexibility, despite jobs which require face-to-face working demanding otherwise. They suspect sinister motives, blaming media harassment for the introduction of this requirement.

Employees voted to strike over the "irrational" imposition of returning to the office for 60% of the week, and are working to rule, refusing any extra tasks. Confronted with the immense delays that are obstructing property sales, managers may be inclined to turn a blind eye to remote working.

Against the idea of returning to the office for 60% to 100% of the week, 60 to 100 per cent. However, the police force is acting firmly, stating it will not pay staff for any days spent working from home. The Public and Commercial Services union has warned that such a move could provoke an all-out strike. Doesn't the government want to heighten conflict over something unimportant to bosses, yet vital to many of their staff's personal lives?

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Forcing staff back into the office is prompting employees to look for fresh job opportunities

Many people have changed careers due to a lack of flexibility in their work, and most job applicants consider flexibility when thinking about whether to accept a new job – and flexible working options are a major draw for potential employees. Research by the Institute for Fiscal Studies suggests that individuals value the possibility of working from home two or three days a week approximately as much as they would a pay increase of around eight per cent.

The government needs to get a clearer stance in what it says to its employees. Is it being friendly, or being tough? It should pay no notice to the Conservatives' claims that it is giving in to union leaders, and instead highlight how new employment laws will make working life more humane. Plans to boost the economy by helping people with disabilities or caring responsibilities get jobs will only work if they have the maximum amount of flexibility. And let's not forget that working from home is free, which makes it look like a very sensible idea in a year when pay rises are unlikely to be high. It's time to focus on what actually works, not just the number of hours spent at a desk.

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