Jakarta, CNBC Indonesia – The global franchise world was shocked by the news about the largest Pizza Hut franchise licensee who filed for bankruptcy or bankruptcy Chapter or Chapter 11 in the United States. The company is NPC International, which also runs Wendy’s restaurant.
The owner of the Pizza Hut brand itself is held by Yum! Brands Inc., a company listed on the New York Stock Exchange with the YUM stock code. Stock Yum! Brands on the NYSE rose 0.13% at US $ 86.56 / share at the close of trading Thursday morning or Friday morning (3/7/2020) when Indonesia.
Despite the year to date YUM shares declined 14%. The share price is equivalent to Rp 1.2 million / share assuming an exchange rate of Rp 14,000 / US $.
It should be noted, this bankruptcy was filed by the NPC capital owners or referred to as Terwaralaba or Franchisee, not Yum! Brands that become brand holders or Pfranchise or Franchisor.
Submission of Chapter 11 bankruptcy was made on Wednesday (1/7/2020). Chapter 11 bankruptcy in the US allows NPCs to submit a plan for reorganization to pay off their debts to creditors in stages. The company operates more than 1,200 Pizza Hut outlets and nearly 400 Wendy’s restaurants.
Investigate a calibaration, one of the pressures experienced by the NPC is a debt burden of around $ 1 billion or equivalent to Rp. 14 trillion, as reported by CNBC International.
Actually this is not new news. In February 2020, a Bloomberg source also reported this bankruptcy. At that time, a Bloomberg source said that the franchisor had begun negotiating with his creditors.
The company is trying to complete the restructuring out of court but is considering the possibility of filing bankruptcy with a pre-negotiation plan. With Chapter 11 Bankruptcy this means that NPCs can continue to operate while trying to change their business.
Management of Pizza Hut, owned by Yum! Brands Inc., said in a statement that the pizza service area managed by the NPC franchise still continued to serve purchases.
This franchise is also in the middle of pre-negotiating a restructuring agreement with most of its lenders or creditors.
“While submitting the NPC Chapter 11, we see it as an opportunity to create a better future for NPC Pizza Hut restaurants going forward,” Pizza Hut spokesman said in a statement, CNBC International reported.
“As NPCs work through this process, we support results that result in organizations with lower and more sustainable debt levels, a focus on ownership in operational excellence and a greater level of restaurant investment.”
In a note published Tuesday before filing for bankruptcy, Cowen analyst Andrew Charles estimated that Yum Brands could potentially lose up to US $ 54.2 million from annual royalty income and 13 cents from annual earnings per share if the NPC stopped paying royalty fees.
Pizza Hut and Wendy’s are the largest NPC creditors, according to their bankruptcy filing.
The NPC opened its first Pizza Hut location in 1962 or 58 years ago go public (entered the stock exchange) in 1984.
The NPC joined with a number of other companies that had filed for bankruptcy during the pandemic, including holding company Chuck E. Cheese, CEC Entertainment, Hertz car rental companies, and retail retailers J. Crew and JC Penney.
Based on a number of legal literature, the US Bankruptcy Law Chapter 11, or better known as Chapter 11 Bankruptcy (Bankruptcy Chapter 11) does not actually require a company to sell company assets.
The debtor can propose a reorganization plan for debt restructuring in stages. During the Chapter 11 bankruptcy process, they can operate as usual to help pay off the debt.