Pizza Hut and Burger King under new management in Pakistan

KARACHI: Islamabad-based Maaks International has acquired MCR and MCR Pakistan, the firms that run food chains Pizza Hut and Burger King, respectively, in the country, in a transaction industry officials put in the range of $10 million to $15 million.

The franchise business of the two food outlets is currently out of commission with the new owner vowing a comeback within this month, and an addition of roughly 25 new outlets each year. The companies will retain their brand identity, but will come under new management.

Maaks International, a privately-held business, has operations in the rice, petroleum, hospitality, pharmaceuticals, and FMCG sectors.

Its acquisition will involve running the operations of 84 Pizza Hut and 9 Burger King outlets in the country. The new management vows to take this number higher over the next five years.

“We want to revamp operations completely,” Azhar Jafri, Executive Director of the newly-acquired MCR and MCR Pakistan, told Business Recorder in an exclusive interview.

“We plan to increase Pizza Hut branches to 200 and Burger King to around 50 by 2027.”

Jafri, who appeared to be more bullish on Pizza Hut than he was on Burger King, said there was no reason why the pizza business could not retain its position as market leader.

What went wrong?

Jafri said the company was unable to maintain Pizza Hut to its international benchmark, citing this as the main reason for its sub-par performance in the country.

“All outlets have been closed at the moment because of supply-chain issues. The previous management was neither focused on supply-chain nor the ambiance of Pizza Hut.

“During this time, it lost market share and allowed others to get ahead.”

Pizza Hut is owned by Yum! Brands, Inc., based in Kentucky, US. Its subsidiaries operate a system of over 53,000 outlets in 155 countries and territories under the company’s concepts – KFC, Taco Bell, Pizza Hut and The Habit Burger Grill.

Burger King is owned by Restaurant Brands International (RBI) Inc., one of the world's largest quick service restaurant companies with more than $35 billion in annual system-wide sales and over 28,000 restaurants in more than 100 countries. Tim Hortons, Popeyes and Firehouse Subs are other companies owned by RBI.

“The previous management stopped following Yum!’s guidelines. It has also happened in the past with KFC in Pakistan. You will struggle if you stray from those guidelines,” added Jafri.

While the official remained upbeat over future prospects, it was learnt that other business houses also looked to acquire the MCR portfolio that had been up for sale for a while.

“Many renowned businesses also bid to buy MCR but international businesses such as Yum! follow certain guidelines.”

Jafri said the transaction process is now almost complete, and currently, banks’ reconciliation is underway.

He added that the businesses would be run directly as opposed to “sub-franchising”.

The competitors

Jafri said that they will look to compete in the top-tier of pizza outlets, signaling that the price-point would remain high.

Despite inflation, Jafri said that there remains a big market for high-end food businesses in Pakistan.

“Go to Kolachi (restaurant) — there are around 1,000 waiters to serve the high number of customers. Go to Lal Qila (buffet restaurant), which is very expensive. Pizza Hut is comparatively inexpensive compared to their food.”

Jafri said Pakistan’s restaurant market has huge potential. International food-chains such as KFC, McDonald's and even Nandos are all making money in the country.

“Pakistan has been left with two income groups left. You either belong to the high-income group or the low-income one. The middle-income group has been squeezed.”

“Recently, our RGM (Regional General Manager) from Sukkur asked us to open a Pizza Hut outlet in Larkana. He said one KFC branch was recording sales of Rs600,000 to Rs700,000 a day.”

He added that the company was pondering opening branches in Nawabshah and Larkana.

“We may have competition here (Karachi) but we won’t have it in those areas. No one else would go there.”

Jafri said that they will make the best use of technology in what he called the transformation phase.

“We have sent the people making software for us to Dubai so that similar software that Yum! uses internationally is used here as well.”

Issue of pending salaries

Meanwhile, a person recently employed at the company on condition of anonymity, since they were yet to settle arrears, told Business Recorder that there is a large number of employees waiting for salaries.

“Some of our dues have not yet been cleared,” they said.

Jafri admitted the new management has started the process “but due to the reconciliation and transition, pending payments have not been released as yet”.

“It’s not only salaries but vendors and landlords (have been waiting for their dues).”

Jafri added that every payment due on the company will be cleared.

“(We will pay) 100% once the audit and reconciliation is complete,” he added.

He said that there are around 1,200 human resource personnel employed by Pizza Hut and they were screening them to see which ones they can retain.

“We have a plan for complete revamp. Screening is part of that plan.”