It may seem like an unlikely combination: Pizza Hut, 24 Hour Fitness and a funeral casket and urn maker.
And yet those are the companies with which the pizza chain stalwart now finds itself under the same roof. On Tuesday, Pizza Hut’s corporate parent, Yum Brands, which also owns Taco Bell and KFC, announced it had sold the chain’s U.S. business for $1.5 billion to the private equity group LongRange Capital.
LongRange, incidentally, owns the round-the-clock gym chain, as well as Batesville, a company that services funeral homes with coffins, urns and “death care” products.
Those three businesses are joined by a ski resort group, a diamond materials firm and a European food manufacturer in LongRange’s portfolio of brands. Pizza Hut’s China-based business is being sold separately to Yum’s China unit.
In the world of private equity, it’s relatively common to have a group of seemingly unrelated businesses under one roof, because they all are run with the same general strategy: maximize returns for investors away from the glare of public markets.
Since they took off in the 1980s, private equity firms have come to fill a gap in the American business landscape, taking over companies often in some kind of distress and subsequently making tough business decisions without having to worry about daily stock price fluctuations.
The announcement of Pizza Hut’s acquisition is a textbook example. The stalwart chain’s sales have stagnated for at least 20 years, according to the research group Technomic, while other chains, especially Domino’s, have built up market share.
Investors for years have called Pizza Hut a figurative albatross around Yum Brands’ share price — and it simply became clear that management no longer had the bandwidth, resources or patience to devote to a turnaround, some experts said.
Yum shares were up 2.2% in Tuesday trading, signaling investors believe the company got a solid return in the sale.
“Yum didn’t know what to do with it and decided they can’t fix it,” said Steven Kaplan, a finance professor at the University of Chicago Booth School of Business. “Yum could have shut down, but they decided there was still enough there that they could sell it.”
In the case of Pizza Hut, the acquiring firm, LongRange Capital, may have its work cut out for it, as the entire pizza category has come under pressure from changing consumer habits, household financial pressures and the rise of GLP-1s.
Pizza Hut in particular has faced outsized challenges, as its market share of limited-service pie demand has dropped from 19% to 15% since 2019, while Domino’s has surged to 30% in the same period, according to Technomic data.
Pizza Hut “doesn’t get much credit for innovation or affordability,” said Robert Byrne, Technomic’s senior director for consumer research. “Even in the pizza space, other brands are perceived as doing those better.”
Diners now also enjoy a seemingly infinite range of delivery options, a sea change from when pizza was more or less the only delivery game in town, Byrne said.
The track record of private equity firms’ ability to turn companies around is uneven.
In 2024, 21 restaurant and bar chains filed for bankruptcy. Ten of those had been backed by private equity, according to PitchBook data cited by CNBC.
The industry publication Restaurant Business likewise found “mixed” results when it came to the PE firm Roark Capital’s ability to create sustainable success for the chains it ran, with McAlister’s Deli, Culver’s and Cinnabon all thriving and Hardee’s, Schlotzsky’s and Carvel registering more lackluster results.
LongRange’s management has experience running consumer-facing food businesses. Founder and managing partner Bob Berlin was a previous investor in Arby’s, while managing director Sunny Patel worked for Kraft Heinz.
Kaplan said that while there are no guarantees, that experience suggests Pizza Hut could have a successful revival.
LongRange did not respond to a request for comment.
Private equity companies have come in for criticism. A recent study found emergency room death rates rose in hospitals after they were acquired by PE firms, which researchers said was correlated to staff cuts and salary reductions. The findings aligned with a 2021 study that found 11% higher mortality rates at nursing homes owned by private equity.
But Kaplan said such outcomes are not necessarily the norm.
“The view that they’re ‘cutthroat’ is ridiculous,” he said.
Their goal is simply to grow a business to increase profits for when the company goes public or is sold again down the road, Kaplan said.
“When PE firms buy something, they are most of the time planning to make it better, not gut it,” he said. “Unfortunately, when you buy lots and lots of companies, sometimes it works, sometimes it doesn’t.”
