Pizza is a go-to fast food for so many Americans. Therefore, if you’re thinking about starting a franchise business, you might want to look into opening a Pizza Hut franchise. Pizza Hut is well known across the country—and even the world.
When it comes to starting a Pizza Hut franchise, however, there is a lot to consider—costs, ongoing fees, training, and more. Luckily, we’ll break down all of this information to help you make a decision about whether or not opening a Pizza Hut franchise is the right business opportunity for you.
Pizza Hut has been around since 1958. Founded in Wichita, Kansas, the pizza chain has experienced explosive growth both in the United States, as well as abroad, in nearly 100 countries. There are almost 20,000 Pizza Hut stores and franchises, making them one of the largest pizza companies in the world.
Pizza Hut is part of Yum! Brands, which is based in Louisville, Kentucky. Yum! Brands owns other various franchises, such as Taco Bell, KFC, and more—all recognizable fast-food names that Americans love.
Types of Pizza Hut Franchises
Franchisees can open up “traditional” Pizza Hut locations, which are the standalone restaurants that you’re probably most familiar with. Some of these have sit-in dining and others are takeout-focused.
That said, there are also “non-traditional development” opportunities through the Pizza Hut Express licensing program. These are the smaller units that appear in places such as stadiums, airports, colleges, and more.
The fees for these types of restaurants are different and include costs for opening the franchise, an architecture fee, and more. You’ll want to directly inquire with Pizza Hut about the details for these non-traditional locations.
Use our guide to learn more about the differences between franchising vs. licensing.
Pros and Cons of Opening a Pizza Hut Franchise
As with any franchise opportunity, there are benefits and drawbacks to choosing to open a Pizza Hut. Here’s what you’ll want to keep in mind:
- National recognition: Pizza Hut is a brand with strong recognition within the U.S.—and across the world, too. You may be able to leverage this recognition into acquiring customers, since they’ll be familiar with your product and have expectations as to what kind of service and food your restaurant delivers.
- Corporate support network: Being part of Yum! Brands, Pizza Hut is part of a large corporate support network, which can be advantageous over other types of smaller franchises.
- Strong vetting: Pizza Hut will only allow strong candidates with good credit and viable business plans to open up stores. So, if you’re selected, it’s a vote of confidence for your ability to succeed.
- High investment: Compared to some franchises, there’s a slightly higher barrier to entry to open up a Pizza Hut franchise, and the cost can quickly climb, especially in expensive, generally urban areas. Before you make your decision, it might be worth looking at some alternative low-cost franchise ideas if your budget is tight.
- Territory protection: Although your store is protected from another location developing within a quarter of a mile, that’s not too much distance. This means that you may not have the protection from competition that some other franchises may offer you.
- Fast time-to-open requirement: After signing your development agreement, Pizza Hut requires that you open your restaurant in one year—which is pretty fast considering they don’t help with construction, nor do they offer internal financing.
How Much Does It Cost to Franchise a Pizza Hut?
Cost is a hugely important factor in determining whether any franchise is right for you, including Pizza Hut. As with most franchises, there’s a large range of exactly how much this franchise may cost you.
That said, in terms of an initial investment, you should expect to pay anywhere from about $297,000 to $563,000 to open up a Pizza Hut franchise. Some estimates also say that startup costs reach as high as $2 million, depending on factors such as location, type of store, and number of stores.
With that in mind, it’s also important to note that the initial franchise fee is $25,000 per restaurant for a 20-year agreement.
On top of these Pizza Hut franchise costs, as we’ll discuss in greater detail below, there will also be some ongoing fees you’ll have to pay once you get your franchise up and running—including monthly royalties (6% of gross sales) and national advertising (4.25% of gross sales).
How to Open a Pizza Hut Franchise
Now that you know a little bit of background about Pizza Hut and their franchise program, let’s walk through the important details you need to know about opening one of their franchises.
1. Meet the franchise requirements.
To open a Pizza Hut franchise, you’ll have to meet certain requirements laid out by the company. These requirements are both financial and experience-based.
First, you’ll need to meet the following financial requirements:
- Net worth of $700,000.
- Cash liquidity of $350,000
- Strong credit score and credit history
- Financial plan for future development, endorsed by the parent company
In terms of experience requirements, Pizza Hut requires that candidates have prior restaurant or retail management experience and a strong interest in growing their number of franchise units.
2. Submit an application.
If you can meet the Pizza Hut franchise requirements, you’ll be able to submit an application and go through the approval process. The initial qualification process includes a series of background checks, as well as interviews.
Then, the next steps involve an in-store experience, interviews with the operations team, and finally, a “Meet the Team Day” in Plano, Texas, and meetings with the leadership team. This entire process can take anywhere from 10 to 12 weeks.
3. Go through the training process.
After you receive approval for your Pizza Hut franchise, you should expect a timeline of an additional three to nine months to get up and running, depending on the number of stores you’re opening, the place in which you’re opening, and the footprint of your store.
At this point, you’ll be required to attend training and your key operator also has the option to join you. You should expect to spend two to three months in training, both in the classroom as well as within a training restaurant.
The training occurs in Dallas, Texas. Unlike some other restaurant franchisors, Pizza Hut pays the fee for the training, although you’ll be responsible for travel and accommodations during the training period.
4. Get financing.
Some franchisors offer direct financing, but Pizza Hut is not among them. You’ll have to look to outside capital sources, such as alternative lenders and SBA loans, in order to secure financing.
There are different types of franchise financing, including options like:
- Flexible business lines of credit for things including payroll and accounts payable
- Business term loans for things including construction and build-outs
- Equipment financing, which is meant specifically to finance large assets, such as the pizza ovens you’ll need
It’s normal to pursue financing through these sources and most lenders will be used to working with those seeking financing for a franchise.
Although Pizza Hut doesn’t offer internal financing, they do offer the YUM Minority Lending Assistance Program, which is available for qualified franchisees (African Americans, Hispanic Americans, Native Americans, Indian tribes, Asian Pacific Americans, and other minorities) that meet the criteria for opening a Pizza Hut.
Through this program, Pizza Hut’s parent company will guarantee 25% of a loan up to $12 million, with a maximum of $3 million per loan or franchise.
5. Build your restaurant.
You are responsible for the construction of your restaurant. Pizza Hut does provide some resources, including the names of general contractors who regularly work on their restaurants.
Additionally, you may be able to contact Pizza Hut about paying a fee to employ their services to complete construction on your behalf. It’s important to remember that after your trade area has been approved and you sign your development agreement, you have one year to open your restaurant for business.
Territory Protection and Operation Radius
Some franchisors guarantee territory protection for franchisees in order for competitive franchisors to not build on top of them. Pizza Hut protects restaurants from other restaurants developing within 500 yards, which is about a quarter of a mile. The franchisor will also determine your delivery radius.
6. Pay ongoing fees.
As we mentioned above, once you actually build and open your restaurant, you’ll be responsible for some ongoing Pizza Hut franchise costs.
These are the most important franchise fees to keep in mind:
- Royalty fee: You’ll pay a franchise royalty fee based on your store’s gross sales. Expect to pay 6%, though it may be slightly higher in some circumstances. This royalty fee will be paid out at predetermined intervals, such as monthly or quarterly, depending on corporate guidelines.
- Advertising and marketing fee: Your marketing and advertising fee is also based on gross sales. You should expect to pay 4.25%, which is also collected at predetermined periods.
- Technology fee: Pizza Hut franchisees must also pay a $2,500 fee for technology access each year.
- Late fees: If you’re unable to pay your fees out to the franchisor on time, you’ll incur a late fee of 1.5% each month your payment is delinquent.
The Bottom Line
There are both pros and cons to opening a Pizza Hut franchise. As with any other franchise, it’s important to think things through before making a decision about what kind of opportunity is right for you.
That said, it can also be helpful to review a Pizza Hut franchise disclosure document, or FDD, which will contain a comprehensive breakdown of all the policies you need to follow when opening a Pizza Hut Franchise, as well as the most up-to-date costs and fees.
- Franchise.Pizzahut.com. “Investment”
Christine Aebischer is an editor at JustBusiness and Fundera.
Previously, Christine was an editor at the financial planning startup LearnVest and its parent company, Northwestern Mutual. There she wrote and edited on topics such as debt, budgeting, insurance, taxes, investing, and retirement. She has written for print and online on topics ranging from personal finance to luxury real estate.