Operations

US franchise giant files Chapter 11; its Pizza Hut, Wendy's locations remain open

With more than 1,200 Pizza Hut locations and nearly 400 Wendy's stores, NPC International Inc. is the nation's largest restaurant concept franchisee by units.

Image: iStock

July 1, 2020

NPC International Inc., which owns more than 1,200 Pizza Hut locations and almost 400 Wendy's stores, entered Tuesday into a restructuring support agreement, which will become part of a comprehensive Chapter 11 bankruptcy plan to reorganize the company, according to a news release.

The RSA — which was made with lenders for "approximately 100% of the company's first lien priority debt and 70% of its first lien debt" — will become part of NPC's Chapter 11 bankruptcy reorganization plan. Leadership said it hopes to reduce NPC's long-term debt and strengthen the company's capital structure.

Accordingly, NPC filed voluntary petitions Tuesday to restructure under Chapter 11 of the U.S. Bankruptcy Code in the U.S. Bankruptcy Court for the Southern District of Texas. NPC intends to use the Chapter 11 process to engage in further discussions with its brand partners, landlords and other creditors to achieve a consensual Chapter 11 plan of reorganization that will best position the company for long-term success in the current restaurant industry environment, it said.

"As our industry has been in the midst of dynamic changes due to shifting consumer preferences and dining behavior, we also have been facing increased labor and commodities costs and a higher level of financial leverage that presents obstacles to achieving our long-term business objectives," Jon Weber, president and CEO of NPC's Pizza Hut division, said in the release.

"These challenges have been magnified recently by the impact and uncertainty of COVID-19, and we believe it is necessary to take proactive steps to strengthen our capital structure, so we have the financial flexibility to continue to adapt to current industry trends. We also intend to use this process to continue to evaluate and optimize our restaurant portfolio so that we are best positioned to meet the needs of consumers across the country."

Carl Hauch, president and CEO of NPC's smaller Wendy's division said its status was recovering nonetheless.

"The Wendy's business remains strong and resilient and is already recovering from the impact of the pandemic to produce year-over-year growth," Hauch said in the release. "We look forward to continuing our discussions with our brand partners, landlords and other creditor groups and are confident that we will be able to work collaboratively to agree on a long-term plan that is in the best interests of all stakeholders."

Operations, employee pay to continue

NPC has filed several customary so-called "First Day" motions with the court, which ensure the company can maintain operations and a smooth transition into Chapter 11. Among these motions is one to continue providing wages, salaries and benefits to all NPC employees without change or interruption.

NPC said it does not expect there to any changes to employees' day-to-day job responsibilities or work schedules. Similarly, it intends to pay vendors under customary terms for goods and services provided on or after the Chapter 11 filing date.

NPC has sought and expects to receive authorization to continue using its available cash, which it said it believes will provide sufficient liquidity to meet its ongoing obligations throughout the Chapter 11 process.

NPC's Pizza Hut and Wendy's restaurants throughout the country remain open for business on regular schedules. NPC is continuing to closely follow the guidance and recommendations from the Centers for Disease Control and Prevention, as well as from local and federal governments and public agencies, regarding any service restrictions.

"During the past few months as we have navigated the challenges presented by COVID-19, Jon and I have been incredibly pleased with the resilience of our business and the commitment of our employees throughout the NPC organization," Hauch said. "We could not be prouder of the way our teams responded to an unprecedented situation and continued to provide essential dining services to consumers throughout the country. As we go through this process, that focus on providing outstanding and safe service to guests in our Wendy's and Pizza Hut restaurants will not change. Our restaurants remain open on normal schedules, and we are maintaining the highest standards of safety, cleanliness and hygiene."

NPC International, Inc. is the largest franchisee of any restaurant concept in the U.S. based on unit count and the fifth-largest restaurant unit operator nationally based on unit count. It's based in Leawood, Kansas, and has 7,500 full-time employees and 28,500 part-time employees, operating in 30 states and the District of Columbia.