Pizza Hut halts expansion plans for cafe concept

Nation's Restaurant News, Feb 1, 1993 by Theresa Howard

WICHITA, Kan. -- Citing operational problems, Pizza Hut has nixed expansion plans of its Pizza Hut Cafe, the concept that was expected to mark the PepsiCo company's move into the casual-dining segment.

"As we started to look at the results, they were impressive but not from an operating standpoint," said Allan Huston, the company's president and chief executive. He said operating costs compared with those of a traditional Pizza Hut "were significantly higher."

So much so, he said, that the property "could not give an adequate return." Huston declined, however, to say just how much higher costs are for the prototype cafe, which will continue operating here as a single unit.

"In one way, the concept is much further out than our existing asset base," Huston said of the cafe compared with the chain's core red-roof restaurants.

On the other hand, "it just wasn't far enough. It is kind of in a no-man's land," Huston said.

While the chain already offers full service in most of its stores, the cafe's menu, service and decor offer a more upscale experience than do the company's traditional restaurants. Those elements helped establish the prototype as a "special occasion," and that is not the image Pizza Hut wanted to project, said Phil Crimmins, the company's senior director of new concept development.

The cafe was initially expected to grow into a few hundred stores to compete against the highly successful Olive Gardens and Chili's of the restaurant world.

When Pizza Hut introduced the cafe, the company had cited the rapidly growing casual-dining segment as detrimental to the company's dine-in business, which had also taken a hit when Pizza Hut was looking the other way to delivery.

Both Crimmins and Huston said revitalizing the chain's existing dine-in business has become its first priority, and that goal prompted the cafe's repositioning on the company's agenda.

"Our first priority is to revitalize red roofs by focusing on products, updated decor and improving service," Crimmins added.

Crimmins and Huston both rejected the notion that PepsiCo's buy into a high-profile and rapidly expanding gourmet pizza restaurant halted plans to expand the cafe.

In June the food and beverage conglomerate bought a 50-percent stake -- and later upped the ante to 67 percent -- in the 29-unit California Pizza Kitchen, which features gourmet pizzas and an $11-per-person check average. In an interview with NRN, PepsiCo lauded CPK for "attracting, retaining and training" its frontline service. PepsiCo also said, "We think we can learn some of those applications and modify them to fit our business."

"It had nothing to do with it," Huston said. "That is an entirely different business. There are certainly some things that we can learn in respect to our customers. But their economics are different from ours. We are going to be making some service changes relative to our economics and what our customers are looking for."

As Pizza Hut researches customer wants and awaits service and operational tips from its half-sister, the cafe will continue to serve as a "laboratory" for new products.

Currently the restaurant is testing a line of dinners called the "Grand Pan Dinners." The line features six varieties of complete dinners: roasted chicken, chicken primavera, four-cheese pasta pie, baked and breaded shrimp, Italian steak and meatball pasta pie. Prices range from $3.95 to $6.95.