00:00You know, this is a popular topic of conversation for people my age because we remember it so well, you
00:07know, with well-lighted, packed restaurants, happy staff.
00:10And now it's like no staff, dark, and the product has fallen off a cliff. Is that fair?
00:15Yeah, I think that's fair. And I think that's kind of why we've seen this spiral downward.
00:20I'd say Domino's has had a big impact on that, right, and Papa John's as well.
00:25So competition has definitely increased from the other national players.
00:30But those are all also takeout places, right? Pizza Hut used to be a restaurant you would go to.
00:35And now I wouldn't bring my family there.
00:38Well, sit-down restaurants in general have also, the competition for sit-down occasions has also increased mightily, right?
00:47And so now Pizza Hut is stuck with these huge footprint stores here in the U.S., you know, especially,
00:53without the volume to justify them, right?
00:56And they're doing more to-go orders and things of that nature.
01:01And so, you know, profitability has really declined for the franchisees.
01:06And so they haven't been reinvesting in the business.
01:09So P.E. buys this. The firm is called Long Range Capital, which I'm going to be honest, I hadn't
01:13heard of before.
01:13Just looking at what they own. So they own 24-Hour Fitness.
01:17They own a funeral products and services provider, a maker of synthetic diamonds for mining.
01:24They also own a ski resort in Kittspool.
01:27This doesn't scream to me, hey, we're the guys to turn around the struggling Pizza Hut.
01:32I don't have to worry about that anymore. I only work with the public chains.
01:36Okay, okay. But you know these businesses, Mike.
01:40I mean, what can be done to turn it around?
01:43I mean, what you need to do is change the footprint.
01:46I mean, you know, they need to have small thousand square foot, 1500 square foot delivery and pick up only
01:52stores like Domino's and Papa John's.
01:55That's where, you know, the money can be made in this business.
02:00When it comes to the real estate, it's tough.
02:03You know, going back to that point, that's been kind of a yoke on its neck for years now.
02:09Those red roof restaurants and, you know, it's going to be tough to turn around here in the United States.
02:15I think there's more of an opportunity with Pizza Hut internationally and especially in China.
02:21What does Yum! Brands then have left?
02:24I mean, what can they do with Kentucky Fried Chicken and Toxic Hell?
02:26Well, so listen, KFC and Taco Bell are their two twin growth engines.
02:33Taco Bell is an absolute machine, right?
02:36They're gold standard in QSR, right?
02:40Tons of talent have come out of that organization, best in class in terms of marketing, absolute machine.
02:48KFC internationally, unit growth is very, very strong, been very, very strong for years, has done very well internationally.
02:55Now their U.S. turnaround is starting to show some signs of life.
02:59And so what they have remaining is a company that's going to grow faster than it had.
03:05Margins are going to expand.
03:07And as you're seeing in the pre-market today, the valuation multiple is going to, you know, move higher.
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