Doubts have been cast over the future of Pizza Hut UK as the dine-in restaurant chain battles with a debt crisis.
The operator of Pizza Hut UK, Heart with Smart, revealed that “unprecedented inflationary pressures” have meant that the chain is anticipating a potential breach of its covenants.
The business is now looking to refinance some £31m of its £73m debt pile.
Pizza Hut UK’s auditors, PwC, also warned in its annual accounts that there is a ‘material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern’, according to The Sunday Times.
However, Heart with Smart says it sees “no risk of closure” of its 150 UK restaurants, saying: “Discussions with lenders are progressing well and Heart with Smart is confident in (debt provider) Pricoa’s support.”
Heart with Smart added that it does not expect to breach its covenants, unless guest demand takes a significant downturn during the summer and reaches a low point in October. It added that it has an “excellent” relationship with its lenders and any potential breach is likely to be waived.
Pizza Hut UK is the dine-in arm of the restaurant giant’s UK business. Heart with Smart acquired the franchisee in 2018 when it operated an estate of around 280 sites.
However, amid the Pandemic, the business underwent a company voluntary arrangement in 2020 which led to the closure of a number of sites. Heart with Smart now operates 152 Pizza Hut restaurants and four Itsu sites.
The closure of these sites would not spell the end for the Pizza Hut brand in the UK, with the business’s delivery branch operating over 350 restaurants under a separate group owned by Yum! Brands.