Pizza Hut carves a slice of home delivery market
Pizza Hut, a franchised restaurant chain managed by conglomerate Jardine Pacific, wants a bigger slice of Hong Kong's competitive food catering business by tapping the more lucrative delivery catering services.
Henry Yip Cheuk-tak, chief executive of Jardine Restaurant Group, said Pizza Hut had recently strengthened its delivery services by spending $15 million on setting up a call centre to shorten the ordering time for delivery and earmarking an annual budget of $20 million on marketing.
The move is aimed at boosting sales of the 63-strong restaurant chain, which had annual turnover of $800 million, according to Mr Yip.
Of the amount, 45 per cent, or $350 million, was derived from delivery. Dine-in services contributed the same proportion of turnover, at $350 million, and takeaway accounted for $100 million.
'Since we opened the call centre about three weeks ago, overall sales were 25 per cent higher year on year, and the transaction numbers jumped 20 per cent,' Mr Yip said. 'The response was ahead of our expectations.'
The popularity of delivery services mirror not only a more buoyant economy but also a shifting trend in consumers' dining habits and time management.
'Our services are particularly popular with couples or office workers who have such long working hours on weekdays that they don't have time to cook, or they are too tired to cook,' Mr Yip said.
'And many order delivery on weekends to stay home for television programmes on football or horse racing.' Without the rental burden, Pizza Hut's delivery business is more lucrative than its dine-in business.
The delivery business enjoyed a 'low-teen' profit margin compared with the single-digit margin of its dine-in business, Mr Yip said.
'Rental costs have eaten into our restaurants' profit margin,' he said. 'It's a tough business.'
He added that some landlords were asking for a 30 per cent to 70 per cent increase in monthly rent on lease renewal.
Located in lower-cost Guangzhou, the call centre has about 200 representatives taking delivery calls from Hong Kong.
Delivery was by a fleet of 700 motor scooters and 900 drivers.
Mr Yip said Pizza Hut would recoup its investment in the call centre if its sales grew 7 per cent, and that the call centre would be profitable if sales grew 10 per cent. Although it competes directly with other pizza delivery chains, Domino's Pizza and Pizza-Box, Pizza Hut is fending off punishing competition from other restaurants such as Cafe de Coral, Maxim's and Fairwood by opening six outlets in each of the next three years, he said.
At a cost of about $6 million each, the new restaurants would be located in the busy shopping districts of Mong Kok, Causeway Bay and Tsim Sha Tsui, Mr Yip said.