Pizza Hut Report
Pizza Hut, Inc.
Case Report
By Randy Clark
Overview
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, while the eat-in segment has recently seen very slow growth. 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. Its attempt to attain system-wide acceptance has not been well received by its franchises. Pizza Hut franchisees are predominantly large powerful organizations, two-thirds of which own more than 10 restaurants each. The franchises are divided on their assessments of the value of the delivery business, and most do not agree with Pizza Hut’s specific plans for reaching this segment. After finding little initial success convincing the franchises to participate, Pizza Hut must find a way to “sell” its concept to the franchises.
Key Decision Points
• 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?
• If Pizza Hut does pursue the opportunity to move into the delivery segment of the pizza market, what operational approach should they use?
• 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?
• 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?
Industry Trends
Two distinct trends were evident in the food industry of the
Case Report
By Randy Clark
Overview
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, while the eat-in segment has recently seen very slow growth. 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. Its attempt to attain system-wide acceptance has not been well received by its franchises. Pizza Hut franchisees are predominantly large powerful organizations, two-thirds of which own more than 10 restaurants each. The franchises are divided on their assessments of the value of the delivery business, and most do not agree with Pizza Hut’s specific plans for reaching this segment. After finding little initial success convincing the franchises to participate, Pizza Hut must find a way to “sell” its concept to the franchises.
Key Decision Points
• 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?
• If Pizza Hut does pursue the opportunity to move into the delivery segment of the pizza market, what operational approach should they use?
• 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?
• 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?
Industry Trends
Two distinct trends were evident in the food industry of the