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    Pizza Hut: Submitted By:-Wasim Akram

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    janedoh
    Pizza Hut was founded in 1958 in Wichita, Kansas and has since expanded internationally. In the 1980s, it faced competition from Domino's as delivery became an increasingly large segment of the pizza market. While Pizza Hut had traditionally focused on dine-in restaurants, it decided to enter the delivery segment. This posed challenges around cannibalizing existing business and convincing franchisees, but adopting a new delivery and ordering system helped Pizza Hut succeed in this new area.

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    Pizza Hut: Submitted By:-Wasim Akram

    Uploaded by

    janedoh
    37 views25 pages
    Pizza Hut was founded in 1958 in Wichita, Kansas and has since expanded internationally. In the 1980s, it faced competition from Domino's as delivery became an increasingly large segment of the pizza market. While Pizza Hut had traditionally focused on dine-in restaurants, it decided to enter the delivery segment. This posed challenges around cannibalizing existing business and convincing franchisees, but adopting a new delivery and ordering system helped Pizza Hut succeed in this new area.

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    Pizza Hut was founded in 1958 in Wichita, Kansas and has since expanded internationally. In the 1980s, it faced competition from Domino's as delivery became an increasingly large segment of the pizza market. While Pizza Hut had traditionally focused on dine-in restaurants, it decided to enter the delivery segment. This posed challenges around cannibalizing existing business and convincing franchisees, but adopting a new delivery and ordering system helped Pizza Hut succeed in this new area.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    37 views25 pages

    Pizza Hut: Submitted By:-Wasim Akram

    Uploaded by

    janedoh
    Pizza Hut was founded in 1958 in Wichita, Kansas and has since expanded internationally. In the 1980s, it faced competition from Domino's as delivery became an increasingly large segment of the pizza market. While Pizza Hut had traditionally focused on dine-in restaurants, it decided to enter the delivery segment. This posed challenges around cannibalizing existing business and convincing franchisees, but adopting a new delivery and ordering system helped Pizza Hut succeed in this new area.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 25

    PIZZA HUT

    1958-1967
    1967-1999

    1999-PRESENT

    Submitted by :-
    Wasim Akram
    GENERAL INFORMATION
    • TYPE - PUBLIC
    • FOUNDED - WICHITA, KANSAS (1958)
    • LOCATION - DALLAS, TEXAS
    • KEY PEOPLE - DAN AND FRANK CARNEY (FOUNDERS) DAVID C.
    NOVAK (CEO)
    • INDUSTRY - FOOD WHOLESALE
    • PRODUCTS - PIZZA
    • EMPLOYEES - 250,000 (APPROX.)
    • WEBSITE - WWW.PIZZAHUT.COM
    PIZZA HUT STORY
    • 1958: THE LEGACY OF PIZZA HUT BEGAN, WHEN TWO COLLEGE-AGED
    BROTHERS FROM WHICHITA, KANSAS, FRANK AND DAN CARNEY
    OPENS FIRST PIZZA HUT RESTAURANT AFTER BORROWING $600
    FROM THEIR MOTHER.
    • 1959: PIZZA HUT IS INCORPORATED IN KANSAS AND THE FIRST
    FRANCHISE UNIT OPENS IN TOPEKA, KANSAS.
    • 1968: INTERNATIONAL MARKET ENTERED WITH OPENING OF PIZZA
    HUT RESTAURANT IN CANADA.
    • 1969: RED ROOF ADOPTED FOR RESTAURANTS.
    • 1972: PIZZA HUT, INC. LISTED ON NEW YORK STOCK EXCHANGE
    UNDER THE SYMBOL PIZ.
    • 1977: PIZZA HUT, INC. STOCKHOLDERS OVERWHELMINGLY APPROVE
    MERGER WITH PEPSICO, INC. FOR AN UNDISCLOSED SUM.
    • 1986:DELIVERY SERVICE, AS A NEW CONCEPT, IS
    INITIATED
    • 1996: PIZZA HUT COMES TO INDIA WITH A DINE IN
    RESTAURANT BANGALORE THAT HAS SPECIAL
    VEGETARIAN PIZZAS.
    • 1997: PIZZA HUT OPENS A DINE-IN RESTAURANT IN DELHI.
    • 2007: PIZZA HUT BROUGHT OUT OUR THICK N THIN PIZZA
    AND BEGAN TO RE-FRANCHISE OUR DINE-IN
    RESTAURANTS.
    • 2009: PIZZA HUT OFFERING BAKED FILLINGS IN THE
    CORNER OF THE PIZZA
    OVERVIEW OF THE CASE
    • BY 1986, PIZZA HUT’S LEADERSHIP OF THE OVERALL PIZZA MARKET
    IS BEING CHALLENGED BY DOMINO’S, A DELIVERY-ONLY CHAIN.

    • THE DELIVERY SEGMENT ACCOUNTS FOR ONLY 20% OF THE $12.7


    BILLION PIZZA MARKET, BUT IT IS GROWING RAPIDLY.

    • A CHANGE IN CONSUMER PREFERENCES HAS LED TO THE


    INCREASED PURCHASES IN THE DELIVERY SEGMENT.

    • AFTER YEARS OF RESISTING ENTRY INTO THE DELIVERY SEGMENT


    FOR FEAR OF CANNIBALIZING ITS EXISTING EAT-IN
    RESTAURANTS, PIZZA HUT HAS DECIDED IT IS NECESSARY TO MOVE
    INTO THE DELIVERY SEGMENT.
    STRENGTHS
    • IT IS THE MARKET LEADER IN PROVIDING DIFFERENT VARIETIES OF
    PIZZAS
    • SPECIALIZES ONLY IN PIZZAS
    • HAS FULL SERVICE RESTAURANT AS WELL AS DELIVERY SERVICES.
    • STRONG FRANCHISEE NETWORK

    WEAKNESS
    • HIGH OVERHEAD COSTS DUE TO LARGE NUMBER OF RESTAURANTS.
    • HIGH PRICE
    • INTERNAL CONFLICTS AMONG FRANCHISEES
    OPPORTUNITY
    • EXPANSION THROUGH ONLINE ORDERING SYSTEM.
    • INTRODUCTION OF MORE INNOVATIVE PIZZAS.
    • VENTURING INTO SENIOR CITIZENS MARKET.

    THREATS
    • THE DIFFERENTIATION STRATEGY FOLLOWED BY ANY PIZZA CHAIN IS
    SOONER OR LATER ADOPTED BY ALL PIZZA INDUSTRY PLAYERS.
    • MAIN THREAT FROM COMPETITORS: DOMINOS
    PORTERS 5-FORCE MODEL
    EXISTING RIVALRY

    • RIVALRY AMONG EXISTING PLAYERS

    • AT PRESENT THERE ARE 3 MAJOR PLAYERS IN US PIZZA


    MARKET MAINLY DOMINOS LITTLE CEASERS PIZZA HUT
    AND THE DEGREE OF RIVALRY IS VERY HIGH

    • THE REASON IS NUMBER OF COMPETITORS IS VERY


    LARGE INDUSTRY GROWTH IS HIGH AND FIXED COST
    INVOLVED IS HIGH
    THREAT OF NEW ENTRANTS
    SINCE INDUSTRY GROWTH IS HIGH IT ATTRACTS NEW
    POTENTIAL FIRMS TO ENTER INTO THE MARKET.
    HOWEVER, IF THE NEW ENTRANTS IS EXPERIENCED THEN
    IT WILL BE ABLE TO COMPETE WITH THE EXISTING
    PLAYERS ELSE THE ECONOMIES OF SCALE ENJOYED BY
    THE EXISTING PLAYERS WILL FORCE THE NEW ENTRANTS
    TO EXISTING MARKETS
    THREATS OF SUBSTITUTE

    THREATS FROM JUNK FOODS SUCH AS HOT


    DOGS, SANDWICHES AND BURGERS.

    THREATS OF BUYERS BARGAINING


    POWER
    FROM CUSTOMER OR BUYERS WHEN THERE ARE
    NUMBER OF SUPPLIERS OF BUYERS CONCENTRATION
    IS HIGH OR LARGE AVAILABILITY OF SUBSTITUTE
    GOODS
    THREATS OF SUPPLIERS BARGAINING
    POWER

    ALSO FROM SUPPLIERS WHEN THERE IS LARGE NUMBER


    OF BUYERS FROM THESE SUPPLIERS, HIGH
    CONCENTRATION OF SUPPLIERS, HIGH SWITCHING COSTS
    AND NON AVAILABILITY OF RAW MATERIAL SUBSTITUTES
    CONSUMER SEGMENTATION BY CHANNEL
    Eat-In Carryout Delivery

    Benefit Atmosphere, Time Time factors


    Quality

    Price Sensitivity Lowest Modest Highest

    Demographic Profile Non-families Families, time- Families,


    starved convenience
    COMPETITION FROM DOMINOS & LOCAL PLAYERS
    System wide Units Average Delivery
    Sales Check/Person($)
    ($ millions)
    PIZZA HUT 1934 5025 9.99 Separate delivery units plus franchisee
    add-on delivery out of restaurant

    DOMINO'S 1550 3696 9.5 Delivery only

    LITTLE 520 1308 2.75 No delivery


    CAESAR
    PIZZA INN 278.7 748 4.3 Separate delivery units

    GODFATHER'S 275 650 9.75 Add-on delivery out of restaurant

    ROUND TABLE 250 535 5 Add-on delivery out of restaurant


    PIZZA
    SHOWBIZ/CHU 249 268 5.2 No delivery
    CK E. CHEESE

    SHAKEY'S 197 386 4.25 Add-on delivery out of restaurant

    Mr. GATTI'S 139.2 319 7.81 Add-on delivery out of restaurant


    1979 1980 1981 1982 1983 1984 1985 1986
    System net sales ($MM) 732 832 1007 1170 1394 1556 1743 1934

    Market share 14.9 15.7 17 17.2 18 17.3 16 15.4


    Units
    Company 1940 1888 1843 1845 1911 2051 2224 2534
    Franchise 1801 1873 1922 1975 2095 2157 2309 2491
    Total 3741 3761 3765 3820 4006 4208 4533 5025

    Company
    PSA sales ($M) 196 221 267 306 348 372
    (Traditional) 395 400
    (Delivery) 282 289

    PSA sales growth


    Real -3.1 4.7 11.8 8 9.8 1.8 2 -2
    Price 6.4 8.1 9 6.6 3.9 5.1 3.4 0.8
    Total 3.3 12.8 20.8 14.6 13.7 6.9 5.4 -1.2

    Net sales($MM) 354 399 476 556 678 766 835 929
    Net sales growth (%) 12.7 19.3 16.8 21.9 13 9 11.3
    Total revenues ($MM) 495 556 489 569 699 795 867 967
    ROAE(%) 3.5 6.1 8.9 16.4 21.7 16.9 15 12.4

    Franchisees:
    PSA sales($M) 237 280 314 350 386 400 415
    REASONS WHY PIZZA HUT ADOPTED
    “FRANCHISING” AS THE ENTRY STRATEGY

    • BEST METHOD TO ESTABLISH OPERATIONS WITHOUT RISK OF


    OPERATIONS IN AN UNFAMILIAR MARKET.

    • FRANCHISING ROUTE HELPS IN LEARNING THE BUYER BEHAVIOUR


    , CONSUMER BEHAVIOUR & MARKET REALITIES.

    • IN COUNTRIES WHERE DIRECT FOREIGN INVESTMENT IS NOT


    ALLOWED , FRANCHISING IS THE EASIEST ROUTE TO ENTER IN
    THESE MARKETS.
    ISSUES IN THE CASE - 1
    SHOULD PIZZA HUT ENTER THE DELIVERY SEGMENT OF
    THE PIZZA MARKET IN AN ATTEMPT TO COMBAT DOMINO’S
    GROWING POPULARITY AND MARKET SHARE FROM THIS
    SEGMENT?
    • YES IT SHOULD ENTER BECAUSE THE PIZZA DELIVERY
    MARKET IS AN ENTIRELY SEPARATE SEGMENT IN ITSELF.
    MOREOVER PIZZA HUT WOULD HAVE COMPETITIVE
    ADVANTAGE BECAUSE OF ITS BRAND NAME.
    KEY CONSTRAINTS

    • CANNIBALIZING
    • CONVINCING THE FRANCHISEE
    • SETTING UP THE INFRASTRUCTURE FOR DELIVERY
    SYSTEM.
    • COMPETITION FROM LOCAL PLAYERS.
    • IT DID NOT CANNIBALIZE THE DINE IN RESTAURANT AS
    BOTH HAVE ITS DIFFERENT MARKET SEGMENTS.
    • PIZZA HUT WAS ABLE TO CONVINCE THEIR FRANCHISEES
    AFTER SUCCESSFULLY PUTTING ACROSS THEIR POINT OF
    HIGH MARKET POTENTIAL IN THE PIZZA DELIVERY
    MARKET.
    • THEY BUILT A VERY ROBUST AND SUSTAINABLE DELIVERY
    MODEL.
    • THEY GAINED COMPETITIVE ADVANTAGE BECAUSE OF
    THE NEW CSC SYSTEM.
    ISSUES IN THE CASE - 2
    IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE
    INTO THE DELIVERY SEGMENT OF THE PIZZA MARKET,
    WHAT OPERATIONAL APPROACH SHOULD THEY USE?

    APPROACHES TO BE FOLLOWED
    • ADOPTION OF CSC SYSTEM.
    • ADEQUATE MAN POWER, DELIVERY VEHICLES AND
    OTHER SUPPORTING INFRASTRUCTURES.
    • PROPER TRAINING OF SALES AND DELIVERY FORCE.
    • PROPER DEMARCATION AND PLANNING OF ZONES AND
    DELIVERY ROUTES.
    ISSUES IN THE CASE - 3

    IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE


    INTO THE DELIVERY SEGMENT OF THE PIZZA MARKET, HOW
    DO THEY CONVINCE THEIR EXTENSIVE FRANCHISE
    SYSTEM TO PARTICIPATE WITH THEM?

    • INCENTIVIZE THE FRANCHISEE.


    • MAKE THE FRANCHISEE UNDERSTAND THE POTENTIAL OF
    DINE AT HOME.
    ISSUES IN THE CASE - 4
    • IF PIZZA HUT DOES PURSUE THE OPPORTUNITY TO MOVE INTO THE
    DELIVERY SEGMENT OF THE PIZZA MARKET, WHAT WILL BE THE
    OVERALL EFFECTS ON THEIR EAT-IN RESTAURANT BUSINESS AND
    THEIR FRANCHISE RELATIONSHIPS?

    EFFECT ON EAT IN RESTAURANT


    EFFECT ON THE FRANCHISES

    IN THE BEGINNING THERE WAS RESISTANCE FOR THE


    ADOPTION OF THE NEW DELIVERY AND CSC SYSTEM BUT
    AFTER LEARNING THE ADVANTAGES OF THESE NEW
    STRATEGIES AND THE GROWTH POTENTIAL THAT IT WOULD
    BRING ALONG WITH IT, THEY ADOPTED THESE NEW
    CHANGES.
    RECOMMENDATION
    • HIGH QUALITY PERSONNEL: TOTAL COOPERATION OF ITS
    EMPLOYEE’S THEREBY INCREASING PRODUCTIVITY , BEATING
    COMPETITION AND ENHANCING CUSTOMER SATISFACTION. FOR THIS
    HIGH INCENTIVES SCHEMES MUST BE ESTABLISHED.
    • FOCUS ATTENTION TO UNTAPPED SEGMENT OF SENIOR CITIZENS:
    CAN ESTABLISH PIZZA HUT SENIOR CLUBS WHICH WILL ORGANISE
    ACTIVITIES FOR OLDIES. INNOVATION AND LAUNCH SOME PRODUCT
    FOR SENIOR CITIZENS.
    • CONTINUOUS INNOVATION IN PRODUCTS
    • INNOVATION THROUGH CONSUMER FEEDBACKS AND REVIEWS AND
    WHAT CHANGES THEY WANT TO SEE.
    • LOCATION: THE MOST CRITICAL SUCCESS FACTOR FOR ANY
    HOSPITALITY BUSINESS IS “LOCATION”. PIZZA HUT DOES NOT AIM TO
    BE A PREMIUM BRAND WITH SELECTIVE DISTRIBUTION, INSTEAD IT

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