NPC International Inc., one of the biggest food franchisees in the United States, will file for bankruptcy protection despite an increase in revenues from its brands since the start of the global health crisis, sources with knowledge of the issue have disclosed.
NPC, the owner of over 1,200 Pizza Hut restaurant chains and 385 Wendy's Co. food branches, may file for Chapter 11 protection as early as Tuesday, sources with information of the franchisee's finances said.
On January 31, NPC International missed paying interest on almost $800 million in loans, causing Moody's Investors Service and S&P Global Ratings to cut their projections on the company's financial obligation.
NPC International has been coping with a wave of problems that led to the group's Chapter 11 filing on Wednesday, including pandemic-linked shutdowns, a skyrocketing debt load of almost $1 billion and increasing operations and food expenditures.
The Pizza Hut chain of NPC has also been hounded with poor sales in the last few months. NPC's food outlets will continue to function while the company evaluates its Chapter 11 filing. NPC employs almost 40,000 workers in 27 US states, its website shows.
According to a Pizza Hut spokesperson, while the Chapter 11 filing by NPC was expected, the franchisee considers it as "an opportunity to create a better future for NPC's Pizza Hut restaurants," Amelia Lucas of CNBC quoted the spokesperson as saying.
While the pandemic has set the stage for closures among major restaurant chains, including the children's food and entertainment chain Chuck E. Cheese, the limitations implemented on restaurant chains to offer only takeout and delivery might have helped improve NPC's chances of staying afloat.
The chain has been reinventing itself in the last three years in a bid to entice customers back in, upgrading its menu and service. Just recently, NPC transitioned its seating restaurants into compact carry-out and delivery options. Wendy's has also spent considerable money to upgrade its drive-thru system.
However, such moves have not been enough to prevail over the ill effects of the COVID-19 scare, and though NPC's private-equity operator Eldridge Industries pledged assistance through its recovery, that may not be the case at the moment.
Around early May, Pizza Hut saw its biggest average revenues in carryout and delivery in the US in the last eight years, mother company Yum Brands Inc disclosed. Same-store profits were up in the low teens demographic, from the end of April through May, NPC noted.
