NPC International Inc., one of the largest restaurant franchisees in the U.S., is preparing to file for bankruptcy protection despite its brands reporting a bump in sales since the coronavirus pandemic, people familiar with the matter said.
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The owner of more than 1,200 Pizza Hut restaurants and 385 Wendy's Co. stores could file for chapter 11 protection as soon as Tuesday, according to people familiar with the company's finances.
The franchisee missed interest payments on its nearly $800 million in loans on Jan. 31, prompting S&P Global Ratings and Moody's Investors Service to lower their views on the company's debt. NPC was in conversations with its lenders for a possible bankruptcy filing at that time, people familiar with the matter said.
An NPC spokeswoman wasn't immediately available for comment.
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A number of franchised restaurant companies have declared bankruptcy since the pandemic hit, including the parent company to Chuck E. Cheese and the U.S. division of bakery chain Le Pain Quotidien. Franchised chains largely depend on customers coming into their dining rooms and have had to navigate a plunge in sales due to mandated restaurant closures.
Pizza Hut was struggling before the pandemic in the U.S., but has proven to be one of the winners from changing consumer behavior during the virus. Quarantined diners have turned to delivery and carryout to eat safely, with a number of pizza chains reporting growth.
In early May, Pizza Hut had its highest average sales in delivery and carryout in the U.S. in the past eight years, according to parent company Yum Brands Inc. Same-store sales were up in the low teens from the end of April through the end of May, the company said.
Kansas-based NPC, which opened its first Pizza Hut restaurant in 1962, employs more than 37,000 people.
But NPC's debt load has burdened the company's outlook for more than a year now. The company has spent on remodeling its units, something a growing number of chains have asked franchisees to do to modernize their brands.
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