This article was updated with the 2023 Franchise Disclosure Document
With 6,614 locations in the US alone and 5,900+ franchised restaurants, Pizza Hut is one of the most famous and popular pizza shop franchises. If you ever thought about getting into the pizza restaurant business, you must have considered opening a Pizza Hut franchise
Yet with a whopping $936,000 investment cost, is this really a good business? How long would it take you to recoup your original investment?
That’s what we’re looking in this article. We will see how much profits you can make with this business and whether Pizza Hut is a good franchise investment. Let’s dive in!
|Sales to investment ratio||1.1x|
|Minimum net worth||$700,000|
|Minimum liquid capital||$350,000|
Pizza hut: an introduction
An American multinational restaurant chain, Pizza Hut has delivery, take-out, and dine-in models. The restaurant chain primarily offers pizza, but it also offers fries, Italian taco, pasta, chicken wings, and breadsticks.
Pizza Hut was founded in 1958, and PepsiCo acquired Pizza Hut in 1977. Later Pizza Hut along with Taco Bell and Kentucky Fried Chicken were spun off by PepsiCo and they became a part of the company named Tricon Global Restaurants, Inc, which was later renamed as Yum! Brands.
Pizza Hut franchise: pros and cons
Opening a Pizza Hut franchise is easy. However, there are several pros and cons that you must know if you intend to buy a Pizza Hut franchise.
- Exclusive territory protection: Franchisees receive the right to operate their pizza stores in a protected area. The franchisor does not authorize other franchisees or competing units to operate in the designated area.
- Diversified income streams: The franchisor provides its franchisees with multiple restaurant formats, such as restaurant-based delivery (RBD), delivery/carryout (Delco), and Delivery Based Restaurant (DBR)/Fast Casual Delco (FCD) system restaurants providing franchisees flexibility and different earning streams.
- Pre-opening training: The franchisor has an extensive training program for its franchisees to learn about the basics of a pizza franchise, customer service, hiring staff, and much more. Franchisees don’t need to be experts in the pizza industry, and the franchisor offers them onboarding assistance and operational strategies.
- Marketing and branding: The franchisor utilizes stellar marketing and advertising tools and programs to help franchisees spread the word about their restaurants and build strong public relations. These included social media, email marketing, loyalty program apps, and more.
- Third-party financing: The franchisor has contracts with third-party lenders to help franchisees fund their startup costs, equipment, inventory, and payroll.
- Growth opportunities: Pizza Hut is one of the leading pizza brands in the world and is owned by a reputable franchise chain, giving franchisees the opportunity to attract customers and expand into multiple locations.
- Not a passive investment: The franchise cannot be run on a “manage-the-manager” basis. The franchisor requires franchisees to take full operational roles in their franchises.
- Not a home-based business: The franchise must be operated from a fixed office space, retail facility, or warehouse, which may push up the startup and ongoing costs.
- Not a part-time business: Pizza Hut franchisees are supposed to operate full-time as per the parent company’s official working hours.
How much does a Pizza Hut franchise cost?
Top open a Pizza Hut franchise, you would need to invest $936,000 on average. This amount also includes the $25,000 initial franchise fee.
Of course, this investment amount is an estimated average and can fluctuate depending on many factors and situations like the format or the location of the restaurant.
There are 3 main types of Pizza Hut restaurants:
- Restaurant Based Delivery (RBD) for dine-in and carryout consumption
- Delivery/Carryout (DelCos) for delivery and carryout consumption only
- Delivery Based Restaurant (“DBR” or “FCD”) which is a mix of the 2 previous. It’s essentially a delivery and carryout consumption restaurant, with limited seating for dine-in as well
According to the latest Franchise Disclosure Document, you would probably invest 3 times more for an RBD vs. a Delco restaurant, which makes sense in light of the smaller space required for delivery and carryout restaurants:
The initial investment includes all types of cost excluding the rent or real estate fees.
For example, you would pay for the initial franchise fee, equipment, opening inventory, building and site improvements, computer system, advertising, training, utility deposits, restaurant set-up, additional funds as a runway of 3 three months’ losses, etc.
How much can you make with a Pizza Hut franchise?
An average Pizza Hut franchise makes $983,000 in sales per year. This figure is the annual median sales of the 4,666 “mature” franchises operated in 2022.
The number can vary, but the differences are not that significant between the types of restaurants as you can see below:
How profitable is a Pizza Hut franchise?
We estimate that the average Pizza Hut franchise makes $92,000 in profits per year. That’s a 9% EBITDA margin.
Luckily, Pizza Hut provides detailed cost information for its franchised restaurants (COGS, labor costs, etc.) which we have summarised below.
|Profit and loss||Amount||% Sales|
Is a Pizza Hut franchise a good investment?
In order for us to assess whether Pizza Hut is a good investment, we need to compare profits vs. the initial investment. Are the profits per year worth the investment cost of $936,000?
As per our analysis, it would take you 6 years as a franchisee to recoup your original investment to open a Pizza Hut franchise. This is what we call the investment payback period.
Therefore, from a pure financial standpoint, Pizza Hut is a great investment.
Yet, keep in mind this number is based on the average of all all franchise stores as disclosed in the FDD. There is no guarantee your restaurant will perform as well.
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