If you head to the Oxford Street branch of Pizza Hut, you might meet Jens Hofma, chief executive of Pizza Hut UK, who still waits on tables at the pizza chain.
After a long, executive day at the office, there are surely few things less appealing than the prospect of putting on a uniform and waiting on tables for four hours.
Not if you’re Jens Hofma. The head of Pizza Hut UK has been doing shifts at some of the chain’s busiest branches since 2009, when the Dutchman was parachuted into the business in a bid to plug its losses. But what started off as an effort to get to know the company in those first few months has turned into a habit for the 46-year-old.
“It’s something I can easily do on my way home pop into a restaurant for three to four hours and go and wait on a number of tables,” he says.
We meet at the Oxford Street branch of Pizza Hut, one of the restaurants where he likes to roll up his sleeves and grab a pile of ever so slightly sticky menus. As he breezes through the door, dressed in a slender-cut suit and open-collar shirt, the staff barely bat an eyelid. Hofma wants to keep it that way.
“It’s very easy when you are running a largish organisation to lose a sense of reality. You are going from meeting to meeting and sometimes you pop into a restaurant and it’s a bit like a celebrity visit and you don’t get a true picture of what it’s like,” he says.
That “true picture” hasn’t always been easy, as Hofma found out four years ago when he took over a restaurant chain that was in the grips of what he openly describes as an “identity crisis”. At the time of his arrival, Hofma worked for Yum! Brands, the US fast food giant that was spun out of PepsiCo (NYSE: PEP - news) in 1997 and which also owns KFC and Taco Bell. Hofma was fresh from a stint running KFC in Germany and was posted to London as a trouble-shooter after the UK Pizza Hut operation plunged into the red.
Pizza Hut, an American brand invented in 1958 in Kansas, first landed on British shores in 1973, with a single site in Islington, North London. It offered something new to the British dining market, which was dominated by fish and chip bars at one end, and the kind of formal restaurants that demanded a jacket and tie at the other.
“The market responded extremely well and we were immensely successful in the 80s and 90s,” says Hofma. “Pizza Hut redefined the eating-out market in many ways. It created a whole new market segment which is today called casual dining but at the time didn’t really have a name.”
The UK business ballooned to some 380 outlets at its peak in 2002-2003. But, by the late nineties, the newly created “casual dining” market had also exploded. Brands such as Pizza Express and T.G.I Friday’s were all jostling for the custom of Britons who had developed a taste for eating out on a regular basis.
“The UK went from one of the least competitive restaurant markets to one of the most competitive in the world,” says Hofma. Until 2006, Pizza Hut was operated as a joint venture between Yum! and Whitbread (LSE: WTB.L - news) , the leisure giant behind Premier Inn and Costa Coffee. The brand had been too used to having its own way in the UK, says Hofma, and responded to the mounting competition by cutting back on costs.
Whitbread sold its 50pc share in the partnership to Yum! for £112m in 2006 but by the time Hofma stepped through his first UK Pizza Hut restaurant in 2009, all was not well. The business had at that point racked up its third consecutive year of losses.
In a bid to keep with the competition, Hofma says the group went down several “blind alleys” including trying to cast itself as an authentic Italian restaurant, introducing a darker décor and Italian names to the menu. It didn’t go down well with Pizza Hut’s teenage and family diners. Hofma found the company also wasn’t getting many of the basics right, such as good customer service and maintaining clean and welcoming restaurants.
The Dutchman, who moved to Switzerland as a teenager, set out re-training staff, closing unprofitable sites and replacing more than a third of its restaurant managers. Pizza Hut has now slimmed down to 330 outlets.
But his task wasn’t made any easier when, in 2011, Yum! decided to cut the UK restaurants business loose and appointed PwC to find a buyer. The deal took far longer than expected. It wasn’t until November (Xetra: A0Z24E - news) that the Pizza Hut UK restaurant business was swallowed up by private equity group Rutland Partners (Frankfurt: A0JJY6 - news) after on-off talks with several other bidders, including turnaround specialists Endless and Risk Capital Partners.
Full financial terms of the deal were not disclosed but Rutland is rumoured to have paid a token £1 in return for a licence agreement to run the Pizza Hut restaurant chain in the UK, which in 2011 posted losses of £24m.
Rutland injected £20m immediately into the company and agreed that a further £40m from cash flow would be used to refurbish many of its restaurants and fund training for its 10,000 staff. Yum! continues to own the brand and the Pizza Hut delivery outlets in the UK, and will receive royalty payments from Rutland.
Hofma and his management team agreed to stay on as a condition of the sale and took what he will only describe as a “worthwhile” stake in the business.
The last 18 months during the sale process have been a “white knuckle ride”, Hofma admits, but he believes there is now a “once in a lifetime” opportunity for Pizza Hut to “get back on the front foot” in the UK.
“For the next 3-4 years we have got about £60m to invest. There is no third party debt in the business and I think we are one of the only ones in this market [in that position]. A lot of the other [casual dining] concepts are very highly leveraged and are under pressure to open new outlets and grow sales very quickly,” he says. “We have eliminated a lot of the negatives of the past.”
Despite its troubles in this country, customers have not deserted Pizza Hut, Hofma stresses, and 3m diners still pass through its doors every month.
The company intends to return to its US roots and will roll out from the second half of this year an American diner-style format that it has been testing at two sites, in Solihull and Birmingham’s Bull Ring shopping district. The two outlets, which have been refurbished to appear more colourful and relaxed have been performing “well ahead “ of other branches.
Self-confessed Anglophile Hofma is coy about setting a target for when business will return to profit. But with a £60m investment coming down the line, can we safely assume it’ll be within the next 4-5 years?
“Oh for sure,” he says. “That’s certainly what we’re aiming for.”
= Jens Hofma CV =
Born October 7, 1966, Netherlands
Education Masters in economics, MBA from IMD, Switzerland
Lives London, with partner Karen