Yum Brands is selling its Pizza Hut division for $2.7 billion in separate deals, with the mainland China operations going to Yum China Holdings Inc. for $1.2 billion and the rest of the chain being acquired by private equity firm LongRange Capital for $1.5 billion, the company announced. Pizza Hut, which has struggled with declining sales and outdated stores, will no longer be part of Yum’s core portfolio, allowing the company to focus on brands like KFC and Taco Bell.

Struggles in a Changing Market

Pizza Hut’s sales have declined in recent years, especially with the rise of delivery and takeaway culture. In the U.S., Yum Brands announced in February plans to close 250 Pizza Hut locations. The chain had 19,974 restaurants worldwide at the end of last year, but its performance has lagged behind other pizza chains that embraced delivery models earlier.

Neil Saunders, managing director of GlobalData, noted that Pizza Hut has long been the weakest part of Yum’s portfolio. ‘Despite efforts to revitalize the brand and shut underperforming locations, it has become increasingly clear that pushing the division back into growth will require a level of investment and patience that Yum is just not prepared to commit to,’ he said. This sentiment is echoed in Yum’s own strategic review, which began in November.

Deal Structure and Ownership

The mainland China Pizza Hut business will be sold to Yum China Holdings Inc. for $1.2 billion. This is a significant market for Pizza Hut, which accounts for 19% of its sales outside the U.S. Separately, LongRange Capital will acquire the rest of the chain for $1.5 billion. Yum Brands CEO Chris Turner said in a statement that the new ownership ‘will be well positioned for future growth with ownership that brings deep expertise in the restaurant industry.’

Yum Brands expects both transactions to close in the third quarter. The company’s stock dipped slightly before the market opened, reflecting investor uncertainty over the move.

Historical Context

Pizza Hut was founded in 1958 in Wichita, Kansas, by two brothers who borrowed $600 from their mother to open the store. The chain’s iconic red roof debuted in 1969, and by 1971, Pizza Hut had become the world’s top pizza chain by sales. In 1977, PepsiCo acquired Pizza Hut, but the restaurant division was later spun off and became Yum Brands in 1997.

By the 1980s, competitors like Domino’s Pizza had surged ahead with a 30-minute delivery promise, while Pizza Hut remained focused on dine-in experiences. In recent years, the rise of delivery platforms like DoorDash and Uber Eats has further challenged the chain’s relevance.