Heart with Smart (HwS), the operator of Pizza Hut Restaurants in the UK, instigated the process in recent days, according to Sky News, which is expected to result in a transaction taking place in the next few months.
One source suggested that as well as the talks with external third parties, it remained possible that a financing solution could be reached with its existing backers.
Insiders told Sky News that the increases to the National Living Wage and National Insurance contributions (NICs) for employers unveiled by Chancellor Rachel Reeves in last month’s Budget would add approximately £4m to HwS’s annual costs.
One added that the Pizza Hut Restaurants' operation needed additional funding to mitigate the impact of the Budget and put the business on a sustainable financial footing.
It comes after auditors warned of ‘uncertainty’ over HwS’s future back in August, despite the group turning around a £3m loss in 2022 to report a £1.75m operating profit in 2023.
The group confirmed at the time that it had completed a significant restructuring of its debt and equity, which it said would provide a ‘strong foundation for future growth’.
It added that it is not forecasting to breach its covenant levels other than in a ‘severe but plausible’ downside scenario in which in guest demand declined sharply in the summer of 2024 before stabilising in October.
As a result of this, PwC noted in its auditor’s report that this ‘indicates the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern’.
Sky News report that the consequences of a failure to find a buyer or new investment are currently unclear.
HwS and Interpath both declined to comment.
Pizza Hut Restaurants is the dine in arm of Pizza Hut in the UK and is an entirely separate entity to Pizza Hut Delivery, which has more than 350 locations across the UK including some with dine-in facilities and is owned by Yum! Brands.
It was acquired by HwS from London-based turnaround investor Rutland Partners in 2018 as part of a management buy-back deal.
At the time the group operated an estate of around 260 restaurants. However, in 2020, amid the Covid-19 pandemic, the group underwent a Company Voluntary Arrangement (CVA) that led to the closure of many of its sites.
According to its website there are currently 140 Pizza Hut Restaurants in the UK.
