Pizza Hut bets on LatAm, Caribbean with Telepizza franchise deal

(Reuters) - Yum Brands Inc's YUM.N Pizza Hut said on Wednesday it signed a franchise agreement with Madrid-based Telepizza Group SA TPZ.MC, in a deal that would make the U.S. company the largest pizza chain in Latin America and the Caribbean.

Telepizza will oversee nearly 1,000 Pizza Huts and contribute nearly 1,500 of its stores to Pizza Hut’s global unit count across all markets including Spain, Portugal and Switzerland, as a part of the deal.

Over a period of time, Telepizza would convert all its stores in Latin America (excluding Brazil) and the Caribbean into Pizza Hut stores, Milind Pant, Pizza Hut International president told Reuters in an interview.

Latin America accounted for 6 percent of Pizza Hut’s total sales in 2017, according to Yum Brands’ first-quarter earnings release.

Telepizza Group aims to open at least 1,300 new stores over the next 10 years, and 2,550 stores total over 20 years. The vast majority of the new store openings will be Pizza Hut, including all stores in Latin America and the Caribbean.

The deal would make Telepizza, Pizza Hut’s largest master franchisee globally by store count.

Pizza Hut has been posting weak sales and has missing same-store sales estimates for the last two quarters, according to Consensus Metrix.

The Telepizza deal is not expected to have a significant impact on Yum Brands’ core operating results or cash flows over the next few years, the companies said.

The Spanish chain, which operates in 23 countries and owns brands such as Telepizza and Jeno’s Pizza, reported sales of about 561 million euros ($664.28 million) in 2017.

(This story Corrects to remove reference to more franchises in paragraph 5.)

Reporting by Vibhuti Sharma in Bengaluru; Editing by Shounak Dasgupta