Instant Analysis: Yum! Brands' Pizza Hut to Expand Widely in Europe

What happened?

Yum! Brands (NYSE: YUM) is firing up the pizza oven in the hopes of growing its business. The company announced that its Pizza Hut division has inked a fresh master franchise agreement with its Europe-based partner, AmRest Holdings.

Image Source: Pizza Hut.

The deal will see Pizza Hut grow its presence significantly in Central and Eastern Europe over the next five years, with over 300 new restaurants to be developed, owned, and operated by AmRest under license. These will be located in the Czech Republic, Slovakia, Hungary, Poland, Bulgaria, Serbia, Croatia, and Slovenia.

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Pizza Hut and AmRest already combine to serve up pies in the region, but their collaboration only covers the Czech Republic, Poland, and Russia at the moment. 80 AmRest-operated restaurants in total are located in these countries; all told, there are over 700 Pizza Huts in 24 nations throughout continental Europe.

The details of the new arrangement have not been disclosed.

Does it matter?

Pizza is clearly a popular export. Look at the most recent quarter reported by pie slinger Papa John's International (NASDAQ: PZZA): on a constant-dollar basis, its international restaurants saw comparable sales growth of 5.3%, outpacing their domestic cousins' rate of 4.8%.

So overseas markets must look like a good opportunity just now to Yum! Brands and Pizza Hut (which, by the way, has been in business far longer than Papa John's).

The new deal with AmRest, in which the European company will do the heavy lifting, is a sensible move in terms of brand visibility. It'll more than triple restaurant count in the CEE region.

However, since it's only the licensing party, Yum! Brands probably won't rake in too much from the arrangement. Besides, stiff competition lurks for Pizza Hut in the form of Papa John's and other fast food/fast casual restaurateurscompeting to feed international diners.

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