PizzaExpress is in negotiations to buy out its Hong Kong-based franchise partner as it seeks to accelerate expansion of the 50-year-old restaurant brand across China.
The pizza chain, which is Chinese owned after last summer’s £873 million purchase by Hony Capital, the private equity firm, is in talks to buy 26 outlets in Hong Kong, Shanghai and surrounding cities.
It recently opened its first company owned restaurant, in Beijing, and Richard Hodgson, the chief executive, said that it was planning to open another 10 to 15 a year over the next five years.
“We think there’s significant potential in China,” he said. “Pizza Hut did ten sites a year in the first ten years, then over the next decade they did 1,000.”
Mr Hodgson said that PizzaExpress, which has about 80 overseas eateries, had an option to buy out the Hong Kong-based Justin Kennedy, a former Citigroup banker, either next year or in 2018 but had decided to try to bring that move forward.
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News of the deal came as PizzaExpress reported underlying earnings of £55 million in the half year to January 11, up 15.8 per cent on the same period last year and £3 million higher than forecast at the time of Hony Capital’s purchase.
Turnover rose by 9.4 per cent to £231 million, helped by 11 openings in the UK and seven in China and India, while like-for-like sales rose by 6.8 per cent after growth of 11.2 per cent over the Christmas fortnight.
Both the number of covers and spend per head increased, helped by strong demand for the thinner-crust Romana pizza range, although Mr Hodgson cautioned that second-half growth would be slightly lower because of strong comparatives.
During the recession, PizzaExpress was one of the biggest users of two-for-one vouchers as it sought to pep up declining sales. However, Mr Hodgson said that discounting was now more targeted, accounting for no more than 10 per cent of total sales.
PizzaExpress, which sells 31 million pizzas through supermarkets compared with 29 million in its restaurants, operates 440 eateries in Britain, and will add another 20 a year for the next five years. Its research suggests that there is scope for another 180 to 200 across the country.
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Mr Hodgson, who took the helm two years ago after 20 years with Asda, Waitrose and Morrisons, said that he was in the early stages of looking at other options for expansion, including developing a cheaper version of PizzaExpress and branching out into “a different cuisine”.
He said that Hony Capital, which recently syndicated some of its £300 million of equity to Bank of China, “were delighted with their investment and say they’re happy to back our plans”.
Asked whether PizzaExpress could join the stock market for the third time when Hony wants to exit in four or five years’ time, Mr Hodgson said: “It wouldn’t surprise me. By then international will account for 20 per cent of profits so it will be a different proposition.”