How Pizza Hut Reimagined Pizza To Become The Largest Pizza Chain

How Pizza Hut Reimagined Pizza To Become The Largest Pizza Chain

We’ll see how Pizza Hut rose to become a global leader, what its business model was and still is based on as well as the recent struggles the company is facing and what steps it’s taking to overcome them.

When you think of iconic pizza brands, Pizza Hut simply must be at or near the top of the list. Founded in 1958, when “that pizza dish” was getting really popular, it quickly rose to US and worldwide fame. It’s considered by many as the original pizza restaurant chain and for decades it was the largest one. 

Pizza Hut is also known for its innovative pizza. It invented (or at the very least popularized) the pan pizza and the stuffed crust pizza.

Excellent customer service, quality pizza, and many novelties helped the brand become a global giant that reached the following numbers in 2020:

  • 17,600+ restaurants
  • Present in 110 countries
  • Earned $11.955 billion annual revenue
  • 350,000 employees 

However, these numbers are actually not great by Pizza Hut standards. And that’s what makes this strategy study so interesting.

Let’s start in Kansas some 60+ years ago.

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From a small hut to delivering pizza into outer space

It was 1958 and yet there seemed to be no decent pizza in Wichita, Kansas.

Brothers Dan and Frank Carney saw that as a business opportunity and borrowed $600 from their mother to open a small pizza shop. They called it Pizza Hut. And it proved that people in Kansas craved pizza.

Dan-and-Frank-CarneyBrothers Dan and Frank Carney Source

By 1959, the brothers established a new branch in Topeka, Kansas, and in only a year they started franchising and expanded to 6 pizza shops! 

In 1968 the first international Pizza Hut franchise was opened in Canada. The business was booming and Pizza Hut soon decided it needed an iconic look. In 1969 the famous red roof first appeared on Pizza Hut restaurants.

pizza-hut-red-roof-1969Source

In 1970 Pizza Hut opened shops in Germany and Australia. It also opened the chain’s 500th restaurant in Nashville, Tennessee. It only needed a bit more than a decade to reach this milestone.

Only a year later, Pizza Hut became the #1 pizza restaurant chain in the world in both sales and number of restaurants - there were over 1,000 Pizza Huts around the globe!

It seemed like a great time to go public on the New York Stock Exchange and Pizza Hut did just that in 1972. The IPO was an enormous success. Pizza Hut’s stock opened at $11 and closed at $32 - tripling its value on day 1. 

Then In 1977, the Carney brothers saw a golden opportunity to sell their business and sold Pizza Hut to PepsiCo for $320 million. Despite the sale, Frank Carney remained the president of Pizza Hut until 1980. Sales that year reached $436 million, and a new $10 million dollar company headquarters opened in Wichita.

It wasn’t until 1980 that Pizza Hut introduced its famous pan pizza in all of its restaurants. A thicker crust pizza served in deep pans quickly became a huge hit.

And long before Uber Eats, in 1994, Pizza Hut became the first brand to create an online ordering experience. People in California could submit an order online, which would be forwarded to a store, and then sent to the customer’s home. It was a novel and cool feature at the time.

Besides buying Pizza Hut, PepsiCo also bought some other well-known restaurants such as KFC and Taco Bell. But in 1997, PepsiCo decided to sell these giant chains off when the company exited the restaurant business. They sold Pizza Hut to Tricon Global Restaurants together with KFC and Taco Bell. These brands are currently under the umbrella of Yum! Brands, Inc.

Since then Pizza Hut has faced many challenges in the 21st century which we’ll discuss in the following chapters.

It also continued to stand out with neat products and marketing stunts.

The most remarkable two were all about pizza delivery.

In 2001, Pizza Hut delivered a specially made pizza to outer space to the International Space Station where Russian cosmonaut, Yuri Usachov, enjoyed some space pizza.

yuri-usachov-eats-pizza-hut-in-space-2001Source

 "Wherever there is life, there will be Pizza Hut pizza," said Randy Grier, a company spokesman at the time.

In 2016, Pizza Hut celebrated the launch of its first restaurant in Tanzania which was the 100th country the chain expanded to. The company set a Guinness World Record for highest elevation pizza delivery by delivering its pizza to the summit of the highest mountain in Africa - Kilimanjaro.

Creative marketing, innovative pizzas, and explosive growth are all possible because of Pizza Hut’s business model. Let’s take a look at what made Pizza Hut the giant it is today.

Key takeaway #1: Supply and demand are still key when starting a business

There’s no secret sauce when it comes to Pizza Hut’s initial success. People wanted quality pizza and good customer service and Pizza Hut provided both. It grew by expanding to areas where its franchisees thought there’s enough demand for pizza to warrant opening a new restaurant. But how they stayed on top of the industry for so long is another thing that we’ll discuss soon.

Pizza Hut’s people-centric strategy

One might say that the business models of various fast food chains are pretty similar. Prepare decent food in a quick and effective manner, have decent margins, and expand via franchising.

While that is true to an extent, Pizza Hut is a great example of what to emphasize and how to ensure the proper execution of your model.

First, let’s touch on franchising. 99% of Pizza Hut’s 17,600+ restaurants around the world are owned and operated by franchisees. Each franchise restaurant pays Pizza Hut royalties and fees - that’s how the company makes most of its revenue.

Here are the main “fees” of Pizza Hut franchisees:

  • Initial Franchise Fee = $25,000
  • Monthly Service Fee (ie: Royalty Rate) = 6% of Gross Sales
  • National Advertising = 4.75% Gross Sales

The above amounts do not include the initial investment required to construct the restaurant, grand opening expenses or opening inventory. 

Now, each restaurant also represents Pizza Hut as a brand. The main challenge and business objectives are to get all franchisees on the same page and to deliver a product and service that’s up to Pizza Hut standards.

Let’s see how Pizza Hut manages that and what they focus on.

Guidelines and coaching ensure a consistent customer experience

Here’s what Pizza Hut is all about in their own words:

At Pizza Hut, we don’t just make pizza. We make people happy. Pizza Hut was built on the belief that pizza night should be special, and we carry that belief into everything we do. With more than 60 years of experience under our belts, we understand how to best serve our customers through tried and true service principles: We create food we’re proud to serve and deliver it fast, with a smile.

Pizza Hut focuses on the experience of eating pizza. And there’s much more to it than the quality of the food - which is obviously still important.

To emphasize this experience Pizza Hut was initially a cozy dine-in restaurant. The company attributes its early growth to three things:

  • The pizza was awesome.
  • The service felt like home.
  • The customers were treated like family.

Since the very beginning, each Pizza Hut restaurant is the face of the company. Its employees aren’t just tasked with preparing quality pizzas, but also with ensuring the customers have a satisfying and enjoyable experience.

In order to help them do that, Pizza Hut came up with a set of core guidelines - its P.E.A.R.L.S. 

P.E.A.R.L.S. mean the following: 

  • Have a PASSION for excellence in everything we do.
  • EXECUTE with positive energy and urgency.
  • Be individually and collectively ACCOUNTABLE for growth in people, customer satisfaction, and profitability.
  • Find reasons to RECOGNIZE the achievement of others and have fun doing it.
  • LISTEN and more importantly, respond to the voice of the customer. 
  • Think SAFETY first.

It helps employees have the mindset Pizza Hut desires when they confront daily challenges and it empowers them to act on their own while fulfilling the brand’s expectations.

Along P.E.A.R.L.S. there’s another customer-centric program with a neat acronym - C.H.A.M.P.S. It ensures that the company listens, responds, and gives its customers what they expect.

Each letter of C.H.A.M.P.S. stands for something that Pizza Hut guests said was important to them — something that makes each customer experience great:

  • Cleanliness
  • Hospitality
  • Accuracy
  • Maintenance
  • Product quality
  • Speed

There are three main components of the C.H.A.M.P.S. program: 

  • Orientation training where new employees get certified during the Introductory Track.
  • CHAMPSCHECKs, which is the measurement tool used to tell Pizza Hut restaurants how they’re doing on delivering C.H.A.M.P.S.
  • Celebrating CHAMPIONS where they celebrate employee achievements as a part of the Team Member recognition program.

C.H.A.M.P.S. allows Pizza Hut to listen and respond to the voice of the customer as well as develop processes to help poor-performing locations improve their guest experience.

As Pat Murtha, the former COO of Pizza Hut said

“Delivering C.H.A.M.P.S means giving our customers a superior experience that consistently surpasses their expectations. Customer experience technologies allow us to recognize excellence in product and service delivery, while also identifying opportunities. It is really about motivating and focusing our team members to take actions that will delight our customers on every occasion.”

While guidelines and programs are nice, they aren’t enough by themselves. To ensure all its franchisees and employees truly understand what’s expected of them, Pizza Hut turned to coaching and training.

Pizza Hut implemented a system where operational leaders are responsible for teaching everyone two levels down from them at their restaurant. 

This method meant that:

  • All the coaches had to learn the coaching model to teach the same.
  • Coaches had to demonstrate their skills and commitment before they got to teach others. They were also accountable for achieving results.
  • As coaches also worked at Pizza Hut, they brought real-life examples into the training, increasing the relevance, impact, usefulness, and credibility of the coaching material.
  • In addition to training, coaching logs were created in each restaurant to document each coaching session, its lessons, and commitments.

As a part of the coaching program, a simple acronym was developed that helped coaches improve their work - E.A.R. :

  1. Explore - Observe, ask and listen.
  2. Analyze - What’s the problem? Is it isolated or a pattern? What is the root cause?
  3. Respond - Teach new skills and knowledge. Provide feedback. Offer support and gain commitment.

In case you want to see how Pizza Hut training looked like 30+ years ago, here’s a video from 1988.

https://www.youtube.com/watch?v=7HpCJov3Uj0

Successful coaching paid off as Pizza Hut also implemented a reward system to incentivize restaurant managers.

The company used a Balanced Scorecard to measure finances, internal processes and development, and customer satisfaction, reinforcing its “putting people first” principle. The scorecard was flexible enough to allow for measuring the results of good coaching - such as reduced employee turnover - within a year. 

Pizza Hut was also the first company in the fast-food industry that added its stock options to the list of performance incentives for restaurant managers. 

All the above guidelines, programs, and methods strive to make Pizza Hut restaurants efficient and consistent. Customers know they can expect quality pizza and great service which is one of the main reasons Pizza Hut became as huge as it is today.

The result of a fairly standardized experience Pizza Hut provides is reflected in its value propositions.

Pizza Hut’s value propositions

  • Reputation and brand – Pizza Hut is one of the most well-known and popular pizza brands in the world.
  • Quality and novelty – Pizza Hut is known for providing quality pizzas, pasta dishes, and side dishes, as well as for developing unique and innovative offerings and region-specific pizza toppings.
  • Reliability - Customers know what they can expect and that they are going to be served quickly.
  • Affordability – While not the cheapest, Pizza Hut is large enough to offer quality products at affordable prices, making them accessible to a wide range of customers around the world.
  • Convenience – There are many Pizza Hut restaurants and they offer dine-in as well as delivery across multiple channels. As you’ll see, Pizza Hut might’ve been one of the most convenient options in the past, but times are changing.

This chapter showed how Pizza Hut managed to align its thousands of franchises to create an efficient and quality restaurant chain. Now it’s finally time to talk about pizza and see what (if anything) sets Pizza Hut apart.

Key takeaway #2: Focus on delivering a consistent experience

As Pizza Hut grew it had to figure out how to deliver similar and consistently quality products across all restaurants. Quality pizza was important but wasn’t enough - alignment was crucial. To achieve it created guidelines and made sure everyone understood their job via coaching. Focusing on people - employees and consumers - proved to be the right call.

Winning with customer-driven pizza inventions

While Pizza Hut offers more than just pizzas, it’s mostly known for innovations and variations of the popular dish. That’s why we’ll leave pasta, garlic bread, and salad alone and focus on different versions of pizza the company introduced over the years - not just to make you hungry, but to see how they make business sense.

Let’s start with an anecdote that laid the foundations for Pizza Hut as we know it.

The original Pizza Hut pizza was the current Thin ‘N Crispy option. That wasn’t necessarily the intent though. When the Carney brothers opened their first restaurant they hired a chef who previously worked at a pizzeria to teach them how to make pizza. However, instead of showing them how to make pizza dough, the chef taught them how to make a pizza using the french bread dough. Why? Who knows.

The result was a pizza as thin and crispy as a cracker. The Carney brothers didn’t know that’s not how traditional pizza should be like and their first customers loved the pizza so all was well. As you’ll see, the traditional pizza was introduced much later! 

If you look at the recipes that try to replicate the thin and crispy Pizza Hut pizza, you’ll quickly notice that most recommend bread flour.

At first, simply serving quality pizza was enough, but as Pizza Hut grew the idea for pizza reinvention became more enticing and eventually necessary. Thus we enter...

The innovation era

The main driver behind the reinvention idea was David Novak, who was hired in the 1980s as the head of marketing to block the growth of Domino’s and Little Caesars.

Novak reasoned that new products drove top-line sales, that they enticed more people to purchase the pizza and would keep many of them coming back. He started a new product development team that combined marketing knowledge with a scientific background to make wild new pizzas a reality.

Novak’s initial idea was for Pizza Hut to release a new invention approximately every six to eight weeks. And they certainly pumped out many successful and unsuccessful variations of pizza. Far too many to list them all, so we’ll focus on a few most famous ones.

The Pan pizza

Pan pizza is without a doubt Pizza Hut’s most iconic pizza. Many people think it is the company’s original pizza. It’s not, but it was invented because of it - as early on Pizza Hut had nothing to offer to customers who preferred thicker crust.

Instead of going with traditional pizza and a bit thicker crust, they introduced pan pizza in 1980. The move was a huge success and it showcased that 40% of their customers prefer thick pan pizzas. 

There was another strong business reason behind the invention of pan pizza. Kevin Hochman, the president of Pizza Hut and KFC, explains it:

“Pizza Hut has always been a brand that's had iconic pizzas that are built on really awesome customer insights, and we would set the trend on things. So for example, we want to get in the delivery and carry-out, versus just dine-in. So we invented this idea of a pan pizza that retained heat that could be off-premise at a much higher quality than a thin crust.”

Recently in 2019, Pizza Hut revamped its original pan pizza recipe after almost 40 years. Once again they listened to their customers and aimed to deliver a crispier pizza crust as well as improving the sauce and the cheese blend.

pizza-hut-pan-pizzaSource

The Stuffed Crust pizza

Pizza Hut’s second most iconic invention is a pizza with the outermost edge wrapped around a cylinder of mozzarella cheese - resulting in a delicious stuffed crust.

The initial idea came during one of the focus groups. An odd middle-aged man kept talking about pizza “bones”. He would eat the pizza and leave behind the “bones” for his dog. Asked for clarification, he said the bones were the crust. Nobody ate the crust.

Patty Scheibmeir, a product developer observing the group, quickly jotted an idea on a paper plate sitting in front of her. But before the stuffed crust would see the light of day, the experiment was temporarily killed 13 times as the crust kept splitting open. It took 3 years to get it right.

However, once stuffed crust debuted in 1995, it proved so popular that its first limited six-week trial sold out in four weeks. Sales of stuffed crust reached $300 million in sales after just a year and cemented the pizza as one of the most popular Pizza Hut staples. 

A genius commercial featuring Donald Trump and his first ex-wife, Ivana, played a big part as we’ll see later on.


pizza-hut-stuffed-crust-pizzaSource 

The Edge pizza

With an abundance of toppings all the way to the edge of the pizza, The Edge was a popular choice introduced in 1997.

It was a thin pizza and offered another option to everyone who didn’t like plain crust or any crust at all.

Pizza Hut noted that it was hard to hold onto a pizza with no crust, so they cut it into 16 pieces and made the whole experience very “snackable”. It made pieces easy to grab and eat in just a few bites.

Pizza Hut brought back The Edge in 2021 for a limited amount of time as a part of the brand’s “Newstalgia” campaign.

David Graves, general manager of Pizza Hut US said: “The Edge is a pizza our customers constantly ask us to bring back. Anyone who loves thin-crust pizzas loaded with toppings will love the Edge.”

The Dippin’ Strips pizza

The Dippin’ Strips is a pizza cut into small strips that can be dipped into a number of sauces.

It was created in 2005, after Pizza Hut discovered that 57% of pizza-eaters like to dip their pizza into sauces.

Pizza Hut redesigned the basic pizza and sliced it into 16 rectangular strips, which were perfect for dipping into one of the three popular sauces that came with the pizza: marinara, ranch, and garlic.

Tom James, Pizza Hut chief marketing officer at the time, said: "The fact is, triangle slices just don't fit well into a cup of sauce. Dippin' Strips pizza has been 'dippinomically' designed for dipping. There's nothing complicated about it, you just...dip."

The P’zone

The P’zone is a toasted parmesan pizza crust filled with pizza toppings and melted cheese, baked calzone-style, and served with marinara dipping sauce. It’s smaller than a typical calzone and as pizza hut says “not meant to be shared”.

It was introduced in 2002, but it’s more interesting to see when Pizza Hut decided to bring the popular option back.

The first time was in 2011, while the recession was still being felt in the US. Kurt Kane, chief marketing officer at Pizza Hut at the time, said: "When it comes to unmatched taste at a great price, it doesn't get any better than the $5 P'Zone at Pizza Hut – unless we just give it away. And that's exactly what we're doing. We know that our customers continue to face tough spending decisions in an uncertain economy, so we've decided to reward those who 'like' us on Facebook or sign up for our email program with a delicious free P'Zone when they order a pizza online.”

The P’zone was reintroduced for the second time in 2019. Pizza Hut added it to their $5 lineup for a limited amount of time, just as Domino’s was having success with its $5.99 mix and match deals.

P’zone is seen as a great price/value product and Marianne Radley, Pizza Hut’s chief brand officer at the time, even admitted that franchisees take a little margin loss on a promotion like this. She added that the margin loss is going to be outweighed by the positives: the excitement the product creates and its ability to bring customers back who maybe walked away from the brand.

The traditional Hand-Tossed pizza

There’s really not much to say about the traditional pizza, except that Pizza Hut was able to wait until 1988 before the demand for a traditional pizza made it a worthy addition. They revamped the recipe in 2014, promising a "lighter, airier crust topped with real cheese made from mozzarella and brushed with a garlic buttery flavor". 

The Plant-Based pizza

In 2021 Pizza Hut partnered with Beyond Meat to create a plant-based pepperoni pizza. 

Dariush Ajami, Chief Innovation Officer at Beyond Meat, released a statement: “We know there is strong consumer demand for pepperoni, and we’re thrilled to unveil a game-changing plant-based pepperoni topping as the next chapter in our innovation-focused partnership with Pizza Hut.”

In this case, it’s not just about catering to vegetarians and vegans, but about creating a substitute for meat-based pizzas for a growing number of ecologically aware people. 

Beyond Meat said that they’re confident that the alternative offers the same experience and taste as Pizza Hut’s classic pepperoni.

Localized pizzas

Pizza Hut has a long history of pizzas adapted to local tastes that created some wonderful and some truly weird combinations. Let’s take a look at just a few.

When the first Pizza Hut restaurant opened in Russia (in Moscow) in 1990, the most popular choice on the menu was the “Moskva”. It was a pizza topped with sardines, tuna, mackerel, salmon, and onion.

The most recent offering by Pizza Hut in India, another huge market, is an extended menu of 15 localized pizzas derived from regional tastes that the locals love - such as Sev puri, Chettinadu paneer, and Chicken achari.

There were also many curious failed attempts, such as Cheeseburger Crust pizza in the UK, Marmite pizza in Australia, and Durian pizza in China.

pizza-hut-cheeseburger-crust-pizzaSource

As you can see, Pizza Hut was never afraid of new products and food innovations. Many of them took advantage of a customer-based opportunity and were quite successful. 

As Marianne Radley said in 2019: “We’re all about investing in innovation across the board at Pizza Hut. Whether it’s collaborating with our Plano-based friends at FedEx, working with Toyota to create a mobile pizza-making factory on wheels a reality, or dropping new menu items like the iconic Cheesy Bites Pizza, bold innovation has been in our DNA for decades.”

But in order to get people to try new products, you need strong marketing campaigns. And that’s another area Pizza Hut was quite famous for - until recently.

Key takeaway #3: Successful innovations are driven by customer insights

Pizza Hut’s most successful new pizzas were created as a result of customer research which discovered unaddressed preferences (dipping their pizzas), problems (cold pizzas upon delivery), or opportunities (no one eats the crust). Customers can show a company how they want their products to evolve, but the company has to be willing to listen.

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Good marketing, stale marketing

In this chapter, we’ll take a look at two examples of Pizza Hut’s bold marketing moves to showcase what fueled Pizza Hut’s success in the past and then transition to its current struggles.

Donald Trump saves Pizza Hut?!

In the mid-1990s fast-food market stopped growing and Pizza Hut’s rivals cut their prices. For the first time in a long while the company was facing declining profits.

In order to boost its sales, Pizza Hut decided for a bold move - they were going to push a new product - a Stuffed Crust pizza. But they knew they needed a strong campaign as testing groups were not sold on it. 

"They tried to sell it a million times, a million different ways, and it just wouldn't sell," said Janet Lyons, one of the creative directors tasked with selling stuffed crust pizza.

Pizza Hut wanted to send a clear message - their new stuffed crust was so good that it made you eat pizza “the wrong way”, crust-first. A tall task, right?

The result was one of the most successful TV ads of all time.

It featured Donald Trump and his ex-wife Ivana Trump. Their divorce was one of the hottest topics at the time, they were constantly fighting and seemed to hate each other. No one thought they would be seen together ever again.

Yet there they were, in a Pizza Hut commercial, doing “the wrong thing” together. What was worthy of their reunion? The new stuffed crust. To top it off, the last scene of the commercial shows Ivana asking for the last slice, to which Trump replies, "Actually, dear, you're only entitled to half.”

donald-trump-pizza-hut-adSource

You can watch the ad here:

https://www.youtube.com/watch?v=QVmAcULPMu4

The new pizza backed by the bold ad was a huge success and Pizza Hut’s market share in 1995 rose from 25.6% to 27%, while its sales increased by 16%!

Ordering pizza straight from a fantasy realm

Another very interesting marketing move came a decade later, in 2005. Pizza Hut recognized that gamers eat pizza quite often and could represent a promising new niche.

It partnered with Sony and entered the realm of Everquest II, a multiplayer online game with 325,000 active users at the time.

The goal was to let them order “gaming fuel” without leaving the game. If they typed the command /pizza into the chatbox, Pizza Hut’s website opened up in-game.

The campaign wasn’t a huge success, but it was another innovative marketing move that generated orders from a new potential niche.

But soon Pizza Hut’s marketing got kind of stale.

A failed rebrand

In 2012, Pizza Hut’s sales started declining once again and in 2014 the company decided to rebrand. 

They conducted a year-long research on how the younger generation was eating.

“What we learned was that Americans are increasingly looking for flavor. Americans are experimenting with more ethnic, original, organic, and experimental flavors,” said Jared Drinkwater, Pizza Hut’s VP of marketing at the time.

Pizza Hut revamped its logo and store layout created a new website and expanded the menu by introducing 11 new specialty pizzas and crust flavors. The campaign that went with the rebrand was called “The Flavor of Now”.

However, their overhauled menu proved to be a big miss. The new flavors were developed with millennials in mind, but the target market wasn’t at all impressed with Ginger Boom Boom crusts and balsamic drizzles. PMQ reported that after the menu revamp, Pizza Hut saw a 3.5% drop in quarterly sales. 

The rebrand sent a mixed message and customers were unsure of just what Pizza Hut was trying to be. The change geared towards the younger market also alienated Pizza Hut’s long-time customers.

The sales dipped and the company started reevaluating its market strategy just a year after the rebrand. 

Greg Creed. the CEO of Pizza Hut’s parent company Yum! Brands at the time, said: “Unfortunately, we haven't been as effective as we've liked with our marketing and need to balance its appeal to millennials with mainstream pizza customers. We intend to do this going forward.”

During the rebrand Pizza Hut also failed to truly address the areas where they were falling behind. 

Artie Starrs, president of Pizza Hut U.S. at the time, said in 2018: “Our assets don’t scream loyalty, mobile app, and delivery.”

In 2019, Pizza Hut changed direction once again and even brought back its original logo.

Marianne Radley joined Pizza Hut as a Chief Brand Officer in order to transform its strategy and marketing. She believed that a bolder strategy tapping into customer nostalgia may kickstart growth again. Qualitative research conducted with more than 3,000 consumers reported that customers still consider Pizza Hut as “the OG of the pizza category” – it just needs to own that position more in its communications.

“As we evolved, our tone changed and there really wasn't a clear understanding of what we stood for. We should never have lost sight of where we came from. We were the first national pizza chain that people loved, and we want to tap into that love and that connection people have with the brand to again win their consideration,” Radley says.

The goal was to build a performance marketing team and drive traffic onto delivery platforms and into restaurants. And there was no time to lose.

Just two years before, in 2017, Domino surpassed Pizza Hut as the global pizza industry leader for the first time.

pizza-hut-vs-dominos-revenue-graphSource

How did that happen and what can Pizza Hut do to turn things around? Let’s see.

Key takeaway #5: Send a clear message to your target market

Pizza Hut’s Trump commercial with Ivana carried a very strong and clear message. The new stuffed crust was so good it was worth trying it no matter what. The company’s rebrand on the other hand didn’t have a clear enough goal and didn’t send the right message. It introduced new flavors but didn’t really tell what Pizza Hut was trying to achieve with them. It also didn’t emphasize the company’s digital and delivery improvements, which were the areas where Pizza Hut was falling behind.

Overcoming delivery and online woes

Pizza Hut’s pizza was supposedly the first physical thing that was ever sold online in 1994. They were the first brand to create an online ordering experience that delivered a pizza to your home.

Yet pizza delivery and the online experience are two of the main reasons Pizza Hut fell behind Domino’s and struggled in recent years. So what happened?

Falling behind 

Despite being the first brand to offer pizza online, Pizza Hut never really focused on its pizza delivery experience (until recently).

The brand was known for its dine-in restaurants and online delivery seemed like a case of sophisticated technology being put to trivial use.

However, in 1994 Domino’s was already developing a website that let customers drag virtual toppings toward an onscreen pizza. While they weren’t the first, they were determined to own the online delivery business.

In the 2010s, after the recession, Domino’s went after the younger market - not with their food, but with technology. It outdid Pizza Hut and everyone else with a superior delivery app and website. Then it introduced ordering via Twitter and Facebook Messenger. It met younger consumers where they were spending their time and made ordering pizza super convenient.

And digital convenience was something Pizza Hut was sorely lacking. In 2018, it was the only chain owned by Yum! Brands that still operated its own delivery service despite Yum! Brand’s partnership with GrubHub. The popular third-party delivery app is used by many millennials and gen z-ers to get food yet Pizza Hut was still not on it.

Online delivery quickly became the most important part of the pizza business - especially during the pandemic.

In 2019, Pizza Hut’s dine-in restaurants only accounted for about 10% of Pizza Hut's US sales. That’s when Pizza Hut announced it would be closing 500 stores (most of them dine-in) over the next two years replacing them with express locations. 

And then the pandemic hit in 2020. That’s when pizza chains with strong delivery identities thrived, while others struggled. Pizza Hut was not yet one of them. Its dine-in locations suffered and its largest franchisee declared bankruptcy, which caused the company to close 300 locations.

Domino's and Papa John's overall year-over-year sales rose by 17.6% and 15.9% in 2020, while Pizza Hut’s sales fell by 2.2%.

Yes, that’s bad, but as you’ll soon it could’ve been a lot worse if Pizza Hut waited with some of their changes just a bit longer.

Pizza Hut has been aware of its main problem for quite a while. Greg Creed, former CEO of Yum! Brands said this in 2015: 

“I think the great thing about Pizza Hut is we don’t have a pizza problem, we don’t have a product problem. The issue is, consumers are having problems getting the company’s pizza. Whether it’s ordering the pizza or having the pizza delivered, the issue of easy access has been a major barrier to growth.”

As we’ll see, knowing about the problem and getting all franchisees on board with the solution can prove to be a challenging, slow process.

However, Pizza Hut’s online delivery woes were not the only reason the chain struggled. 

Identity crisis

According to Creed, one of the things Pizza Hut was lacking recently is a strong brand identity. Pizza Hut's message was not distinctive enough to attract new customers.

Their rebrand in 2014 is a great example of being stuck in the middle and trying to cater to the younger market as well as your dine-in customers. It almost looked like it was trying to present itself as a gourmet fast-food pizza, which is a weird compromise that didn’t appeal to customers.

In 2018, CNN uncovered yet another problem why Pizza Hut wasn’t attractive to millennials and gen-Z. Domino’s and other pizza chains were more affordable. Not just that, other pizza chains were offering all kinds of deals and discounts. Pizza Hut not so much. And while everyone would like to eat great pizza, great deals often come first for younger demographics.

In 2018 Greg Creed has said that the issue is something they are aware of. Apparently, it’s been an ongoing challenge to try to get their menu to the right price point and convince all their franchisees to adopt it. 

In the last few years, Pizza Hut is trying to turn the negative trend around. Let’s see what steps they’re taking.

The digital path back to the top?

How is Pizza Hut trying to get its groove back? 

In May 2017, Yum! Brands staged a $130 million intervention. The “Transformation Agreement” is a multi-tiered approach aimed at improving the company’s fundamentals – improving operations, speeding up delivery times, and, most importantly, including an “aggressive investment in digital”.

Soon after that, they introduced a new loyalty program called “Hut Rewards” to engage new consumers and make their delivery more appealing. The goal isn’t just online deliveries, but to stop consumers from jumping from a pizza deal to a pizza deal.

Stephan Croix, chief sales and brand officer of Pizza Hut EMEA, said: “I come from the hotel world, where loyalty programs are a table stake. In our industry, [loyalty programs] are still very new, and we’ve been one of the first players to launch them. And it’s worked. We’ve signed up 1.5 million consumers in less than a year.”

In 2019, the company introduced an in-house customer experience team called “Pizza Hut Digital Ventures”. The team is split across user experience, data analytics, design and computer programming - they specialize in performance marketing across social media, search and email roles, departments. These were roles once handled by agencies. They are making the most of first-party data to reinvent Pizza Hut’s online customer experience.

The team aims to remove friction from the customer journey to ensure it doesn’t take more than five steps to order pizza.

“We’re in the process of building and scaling out some pretty robust solutions. It’s a very, very data-centric and very customer-centric approach. So we’re very much trying to improve our daily decision-making, and conversion rate optimization (CRO) is a huge part of that. We’re probably in the early to mid-stages of a new CRO-led approach to designing our digital experiences,” said Tristan Burns, Pizza Hut’s global head of analytics, in 2021.

The company also introduced Twitter and Facebook Messenger bots that allow customers to order pizza without the need to download the Pizza Hut app in an attempt to engage younger customers.

Recently Pizza Hut introduced another novelty - “The Hut Lane”. It’s accessible via the Pizza Hut mobile app and website, and it enables customers to pull up to the dedicated window, grab their order and go. According to Pizza Hut, The Hut Lane is part of a long-term strategy to modernize through digital ordering and improved customer experiences. 

Pizza Hut’s president, Kevin Hochman, recently emphasized that a better digital experience is Pizza Hut’s priority: 

“We've made some pretty big investments in technology, and we've made some pretty good improvements in technology. But we still have an opportunity to be more frictionless and reliable for our customers. This basically means fewer clicks to be able to order a pizza, and just making it a whole lot easier to navigate.

The reality is our app and our website and our mobile website, that's basically our storefront now for the customer. So we're partnering with the franchisee leadership to make sure we have a world-class digital user experience.”

When it comes to food, Pizza Hut introduced its new $5 menu in 2018 to entice people that are looking for the best price/value. 

It’s also bringing back old favorites as a part of their Newstalgia campaign. The campaign aims to remind people how it was to go to Pizza Hut as a kid but combines nostalgia with some novelties. One of them is a new pizza delivery box design that allows customers to play the classic Pac-Man with the help of AR technology.

pizza-hut-pacmanSource

It’s too early to tell if Pizza Hut’s latest efforts will be enough for the brand to catch up with Domino’s and once again become the #1 pizza player in the world. But they do show Pizza Hut is aware of the problem and is taking steps to solve it - how fast will they manage to move the needle is another question.

Key takeaway #6: You shouldn’t stagnate when it comes to convenience

Most of Pizza Hut’s woes have a common denominator - convenience. They always focused on their dine-in experience, but times have changed and more and more people just want to eat pizza on their couch. The simpler it is to get it there, the better. Pizza hut underestimated the power of convenience and is now facing the tough challenge of catching up.

Pizza Hut’s SWOT analysis

Let’s recap what we’ve covered during this strategy study in a concise SWOT analysis and see where Pizza Hut stands at the moment.

Strengths

Name recognition of the brand

Due to being a huge chain since the 1960s and plenty of big sponsorship deals in the last years (like NFL in 2018), Pizza Hut is a brand that most people recognize and know their offer.

Wide product portfolio

Pizza Hut offers a wide range of products. Along with various types of pizzas some restaurants also offer other Italian cuisine, wings, curry, and many local dishes in different regions around the world.

Global presence

Pizza Hut has restaurants in 110 countries (in 2020) around the world and is a popular and strong brand in many of those countries.

Great service

The restaurants generally offer excellent service quality to their customers. Whether it’s a hygienic food preparation system, fast service, or customer relations, Pizza Hut knows what it’s doing.

Product innovation

Pizza Hut has a history of pizza innovations that resulted in some of the most beloved products on the pizza market. They are still coming up with new products, many of which get customers at least curious enough to try them.

Weaknesses

Dine-in restaurants

Pizza Hut has been built on dine-in restaurants, yet these units are more expensive to maintain, while more and more people turn to pizza delivery. As mentioned, Pizza Hut has been closing hundreds of its dine-in locations and will have to figure out which ones are worth keeping.

Higher prices

Pizza Hut always boasted they provide high-quality pizzas and therefore were never the most budget-friendly option around. But with many new competitors emerging and Pizza Hut stagnating, lower prices and specials deals have enticed many customers to switch their preferred pizzeria.

Brand identity

As we’ve seen, in recent years Pizza Hut went through an unsuccessful rebranding and it’s still not clear what exactly the current brand stands for and who its main target market is. They are trying to reach younger demographics while also depending on nostalgia and their original image. It almost seems Pizza Hut is lacking a clear focus.

Franchising system

Pizza Hut’s franchising model worked just fine for the longest time. But in recent years, when Pizza Hut needed to change, it has shown that it can represent an obstacle. It’s tough to get all franchisees on board to lower prices or offer new services if they don’t want to do it.

Opportunities

Better delivery and online experience

Pizza Hut has been working to improve both, but there’s still some catching up to do. Improving their online ordering and delivery game is not just an opportunity, it’s a necessity if the company wants its sales to improve.

More delivery locations

Instead of dine-restaurants, Pizza Hut should open and expand with more pizza delivery locations that are much cheaper to maintain. That’s something they have been focusing on during the last few years.

New markets

There are still untapped markets for Pizza Hut. There are developing Asian countries where they are not present yet. There are also many suburbs that didn’t fit their target demographic as well. Offering delivery can help them expand to these areas.

Clear messaging

During their rebrand in 2014, Pizza Hut neglected to emphasize that they are now a big delivery player which was a huge mistake. Stressing what they are offering and who they are offering it to should be a priority to establish a clearer brand identity.

Threats

Stiff competition

While Domino’s has overtaken Pizza Hut as the global pizza leader in 2018, there are also many new competitors coming for their market share. With delivery being more and more popular, the barrier to entry has gotten lower and new players have entered the pizza games. 

Increasing costs

Costs of pizza ingredients (and food in general) have been rising over the past few years and Pizza Hut will have to either increase their prices and lose some customers or lower their margins and lose some profit.

Health consciousness

People are becoming more and more health-conscious and pizza is not exactly known as healthy food. While it will surely remain popular, its total market is probably going to shrink over the next years.

Final thoughts and key takeaways

Pizza Hut is an industry-defining company. Many see it as the original pizza chain and for decades it was the undisputable industry leader. Its customer-centric strategy reimagined pizza in a plethora of ways and its employee guidelines set the customer service standard that made the company flourish.

While it’s still indisputably one of the pizza giants (as seen below) it’s currently facing some of the biggest challenges in its history - which makes Pizza Hut’s story all the more interesting. The company is a great example of successful product innovation, but its example also showcases how important it is to innovate in all areas or risk falling behind.

Growth by the numbers

 

2016

2020

#of restaurants

16,420

17,639

# of countries

100

110

# of employees

300,000

350,000

Annual revenue

$12.019 billion

$11.955 billion

 

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Strategic takeaways

  • Use customer insights as guidelines.

Pizza Hut’s most successful pizza novelties came as a result of customer research and focus groups. It showed why the input of the customer should be the deciding factor.

It’s no secret that customer-centric companies are more successful. After all, they give people what they want or need. In fact, listening to customers is the easiest way to create a product roadmap for the future.

  • The brand is only as good as the people that represent it.

Pizza Hut always understood that. It had thousands of franchises all across the globe and it had to align them in order to reflect what its brand stands for.

Guidelines are a good start but are not enough. Companies have to ensure their employees understand what to do and why they are doing it that way. Pizza Hut made sure its methods and expectations were clear by implementing an extensive coaching program.

  • Have a clear marketing message.

Pizza Hut has offered delivery for quite a while - even online delivery. But it was never perceived as a strong pizza delivery chain (as compared to Domino’s e.g.). That’s in part because they never focused on emphasizing that they’re also a strong delivery player.

When a company thinks it has addressed a known issue or simply wants to emphasize its strengths it should do so with a loud and clear message or risk that the meaning will get lost in all the marketing noise surrounding us.

  • Never underestimate convenience.

It’s quite simple - when customers are deciding between two similar options, they’ll choose the more convenient one. When it comes to eating pizza, ordering one is more convenient than going to the restaurant. And ordering one using an already installed app is more convenient than going to Pizza Hut’s webpage.

Pizza Hut neglected that and is now trying to catch up. That’s why companies should always strive to make their customer experience as frictionless and convenient as possible.