Last week, NPC International, the largest franchisee of Pizza Huts, filed for chapter 11 bankruptcy. With 1,200 Pizza Huts and 400 Wendy’s locations, they employ over 40,000 people across 27 states, which they stated that they do plan on continuing to pay and provide benefits for as they restructure. They claimed that rising labor and food costs, as well as COVID-related complications, led to a nearly $1 billion debt.
While many other large companies have also cited COVID-related difficulties as reasons for filing for bankruptcy, this seems to be the first food-related case.
It’s surprising to hear that a major franchisee could be floundering like this. After all, it’s typically believed that, despite steep initial costs, franchises are considered fairly stable options in the restaurant industry. As NPC probably knew, it’s easy to coast by on the reputation of the franchisor’s brand. On the flip side, it’s easy to understand that perhaps not even Wendy’s’ new breakfast menu could help repair the damage that came with the reveal that their chairman of the board is a huge Trump supporter. It’s hard to say if that had a direct effect on NPC’s hardships, as Wendy’s was a much smaller portion of their total franchises.
A while back, I had speculated that when- or maybe if?- the pandemic finally comes to an end, the industry giants would dominate the landscape of the restaurant industry. As independent restaurants struggled to hold out, I assumed that the mega-corporate chains would be the only ones to survive, just barely kept afloat by their economies of scale. But now it seems like not even the industry giants are infallible.
What’s worse is that it seems like this could be spun to support either side of the “reopen the economy” argument. On one hand, Pizza Hut and Wendy’s had both been open throughout the whole pandemic, so it could be said that staying open at all wasn’t the best decision. On the other hand, it could be argued that the bloodthirsty whims of the free market must be sated, and that NPC failed because consumer confidence is down.
I wish that I could optimistically say that the bankruptcy of a major Pizza Hut franchisee could be seen as a sign that local pizza chains are weathering the storm with the support of their communities. But as much as I would like to see the corporate overlords get overthrown, I don’t think that is the case.