Yum Brands is reportedly exploring the sale of Pizza Hut Korea after the Korean unit converted its self-operated outlets to franchised stores and cut thousands of jobs, sources said Monday.
There has been wide speculation after Pizza Hut Korea’s labor union said that the Kentucky-based franchise giant is seeking to sell a master franchising license to a third party company. Yum owns fast food restaurant chains like Pizza Hut, KFC and Taco Bell.
“The company is laying the groundwork for its master franchising plan with the ongoing downsizing and restructuring,” a unionized worker said.
Earlier this year, Pizza Hut Korea converted the majority of its company-owned stores to franchised operationsOf the 75 stores that it operated, 61 outlets are now franchised stores and the remaining are expected to follow suit.
This means all the 350 Pizza Hut outlets in the country will be using the franchise business model.
During the restructuring process, some 3,250 employees lost their jobs in September and other 530 people will leave the company by the end of December, according to the union.
The company admitted that it is undergoing business restructuring but strongly denied rumors of a sale.
“We currently seek to convert 100 percent of our outlets to franchised stores but it’s only part of the company’s global strategy to increase competitiveness in the Korean market,” a Pizza Hut Korea official said.
He added that Korea and the U.K. are the only countries in its worldwide network that still have Pizza Hut’s self-operated stores.
Industry insiders, however, said that the possibility of Yum Brands selling its master franchising license is high due to the lackluster performance of the Korean unit in recent years.
Pizza Hut Korea has seen sales plunged by half to 114.2 billion won ($96.4 million) in 2014 from 300.2 billion won in 2004, losing its No.1 market leader position to rivals such as Domino Pizza and Mr. Pizza.
It posted an operating loss of 700 million won and net operating loss of 300 million won last year.
Meanwhile, Yum Brands announced its plan to divest its stake in its Chinese subsidiary Yum China in October by selling exclusive rights to KFC, Pizza Hut and Taco Bell after a string of difficulties that it has been unable to fix including shrinking revenues and food-safety scandals.
By Park Han-na (hnpark@heraldcorp.com)
