By Rebecca Burn-Callander Wednesday, 27 March 2013

Can Pizza Hut boss Jens Hofma make 'The Hut' cool again?

The MT Interview: Jens Hofma, a Dutch management consultant-turned entrepreneur, needs to put the buzz back into ailing 'dine in' food franchise Pizza Hut. Can he succeed?

You probably haven’t heard of Jens Hofma. He hasn’t been profiled in the Sunday papers or taken part in Secret Millionaire.

He doesn’t have a Twitter handle, doling out 140-character maxims on how to be a business superstar.

Until 2012, he was just another faceless executive, scaling the gilded ladder in a sprawling fast-food corporation. But he now runs – and owns a fat stake in – one of the best-known brands in Britain.

The new boss of Pizza Hut was never supposed to be an entrepreneur. Until the age of 46 (last year), every career move was unambiguously left-brain.

From his degree in economics and his MBA to his finance roles at Nestlé (where he spent nearly a decade) to his stint at management consultancy McKinsey, every working day was spent crunching data, playing with figures and – most importantly – minimising risk.

To look at him now, you wouldn’t think anything had changed. The clean-shaven Dutchman never fidgets and has a posture that would make a Swedish osteopath sit up straight. His accent has become strangely placeless after an adolescence spent in Switzerland and a career that shifted between Prague and London.

Yet two years ago, Hofma made a decision that went against all his training. He decided to stake his personal fortune and reputation on an ailing firm that he had been hired to knead into shape and sell on to the highest bidder. And it was an impulse that he was unable to resist. Why? ‘I fell in love with the business,’ he admits.

Hang on a minute. Surely even its mum would struggle to love poor old Pizza Hut these days. Its high street honey phase is long behind it and it’s now looking decidedly rough round the edges.

Everyone remembers the Pizza Hut of yesteryear: as a tot it was an exciting place to be, with colouring books and desserts with more sprinkles than ice cream. As teenagers, we ‘hit the Hut’ to wind down and stuff our faces after bowling or ice-skating. But most of those customers have grown up and moved on, trading up to the likes of Pizza Express or Strada.

These days, only two things draw people into the dark, dingy recesses of the Hut: first, the price – it’s dirt cheap to feed a whole family. And, second, the locations – in leisure parks and alongside motorways – mean that, outside London, Pizza Hut is often the closest thing to ‘dining out’ you’re going to get.

Hofma insists that he does love it, warts and all, and that his infatuation with Pizza Hut began in 2004 when he was headhunted by Yum!, the fast-food giant that owns Pizza Hut, Taco Bell and KFC.

He recalls that his first interview with Yum!’s Europe CEO, David Fitzjohn, was an eye-opening experience.

‘There I was, in a Savile Row suit, being interviewed by a man in a Hawaiian shirt,’ he recalls. Fitzjohn impressed on Hofma that he ‘couldn’t care less about formalities’ and that Yum! prided itself on ‘characters’, not suits.

For Hofma, who had always taken the straight and analytical path, it was the first step towards rebellion. He took the job.

After Hofma proved his mettle to the US company – he successfully and singlehandedly introduced KFC to the German market, and also sold the concept of ‘finger lickin’ good’ to his compatriots in the Netherlands – he was despatched to work his magic on the struggling Pizza Hut.

It was 2009 and, while takeaways were still popular, the restaurants – the ‘dine-in’ business, as it’s known – were not performing well. Yum! had spent £112m three years before buying the remaining 50% of the business from Costa and Beefeater owner Whitbread, and needed to find a franchisee to take on the 20-year licence.

So Yum! earmarked them for sale, which is where Hofma came in with his brief to spruce up the business and sell it on to a new franchisee. He had no restaurant experience, but it was a promotion and it meant that he could live in ‘my favourite place on earth’: London. Even after three and a half years here, he still visits the theatre at least once a week.

There was the lure of London, and there was the challenge of turning around an unfamiliar and flagging business.

Despite playing host to three million diners a month in its 350 UK restaurants, employing 10,000 people and turning over around £200m a year, Pizza Hut was in trouble.

Hofma refuses to discuss figures and, indeed, digging for recent financial data for Pizza Hut is like digging for nutritional value in a stuffed crust. But Pizza Hut’s last available accounts reveal that in 2011 the business made a loss of £24m and the year before a loss of £22.2m.

Perhaps in order to understand what was going wrong, Hofma started taking shifts at the Oxford Street branch, cooking up deep-pan and waiting on tables. He felt the sticky menus, smelt the filthy loos, bantered with his teenage co-workers, learnt the much-loathed 150 employee ‘standards’ that are prescribed by Yum! and, suddenly, he stopped seeing Pizza Hut as just another company to tweak and flog.

‘Pizza Hut is a snapshot of society. You have the people at the top, who make the big decisions, and then you have the people at the bottom: the pot washers and toilet cleaners. But the guy that goes out of his way to make the toilet extra clean is as important to my business as a highly paid individual sitting in the finance department. If all my restaurants have filthy toilets then I don’t have a business, right?’

He still descends to the coalface every couple of weeks, but he’s never let the Pizza Hut PR machine take pictures of him in action, and he always works in his own time, after his day at the office is over.

Perhaps because it’s such a change from what he has spent most of his career doing, he seems to get a real kick out of this front-line stuff. He personally congratulates star employees and responds to whinges on Hut Space, Pizza Hut’s internal answer to Facebook, where staff moan about their uniforms and exacting managers. ‘I spend 45 minutes a day on it,’ he says.

But Hofma reckons it’s the social politics as much as the hands-on element that sucked him in to the hospitality game. ‘It is a meritocracy,’ he says. ‘I don’t care if you have a degree or what your background is. I just care about your passion for the job. I have plenty of examples of people who have started as the pot wash and end up being in charge of 100 restaurants. There are very few industries – or indeed companies – where you’ll find such upward mobility.’

'Pizza Hut is a snapshot of society,' says CEO Jens Hofma.

It’s clear from the way that Hofma conducts himself, dresses (the tie and corporate uniform are no more) and speaks about his staff that he has no interest in being seen as the ‘big shot CEO’. Perhaps it’s his Dutch egalitarianism, but he is unfailingly polite and treats all comers with the same respect.

He is scathing of the corporate executives at Yum! who used to ‘fly in twice a year on a private jet’ and had never worked in a restaurant in their lives. ‘When you have a senior leader in business who couldn’t even contemplate doing the job that the front-liners are doing, it makes me very distrustful.’

In the bad old days, these visits were a ‘dog and pony’ show, he says, with executives vying to please the visiting dignitary in the hopes of a promotion or pay rise. And Hofma was very much a participating dog (or pony).

‘There were always two agendas,’ he says. ‘The business you were responsible for and your personal ambitions.’ So, now he’s got to the top, is he not tempted to revert to that cigar-chomping type? Why does he care so much about those at the bottom – is it some new brand of CEO socialism?

Hofma prefers to call it ‘humanism’ and believes it has a lot to do with the way he was brought up. ‘My mother grew up in a concentration camp in Indonesia,’ he says. ‘She got caught up in the Second World War and the Japanese put her in a prison camp and she nearly starved to death. My father was also a self-made businessman. In my life, whenever I have come close to thinking that I’m better than anyone else, they bring me straight back to planet earth.’

Nowadays, Hofma has just one overarching aim: to make Pizza Hut cool again. ‘It used to be an off-thewall, rule-breaking concept,’ he says. ‘Before Pizza Hut launched in the 1970s, people who wanted an affordable meal went to the pub or the chippy. We redefined casual dining. We need to find a way to do that again.’

Hofma has made limited progress on the crucial cool factor thus far. But he has scrapped the despised 150 ‘standards’ (greet guest like this, give guest menu like that, etc) that were turning his staff into automatons. Now there are just three. And he has filmed a series of induction videos entreating new staff to welcome guests ‘as though into their own homes’.

From the start, he eschewed the ‘hatchet man’ turnaround route of redundancies and closures, and instead nominated two restaurants (one in Birmingham’s Bull Ring, the other in Solihull) as test sites, where he plays Willy Wonka, only with pizza.

Customer complaints fell by half, the toilets are clean and, early in 2011, interested firms began circling the business. It was the point at which Hofma finally admitted to himself that he was in too deep to leave. ‘I made the decision that Pizza Hut mattered to me an awful lot,’ he says. ‘Even though Yum! wanted to exit, I didn’t. I basically told the Yum! guys: "I’m going to stay," which took them by surprise and made things difficult during the whole sale process.’

Even now, Hofma seems to have trouble working out why he made such a rash move. It’s true that he had less to lose than some, he says.

He lives with his partner, Karen, but they have no children and she has her own successful business interests in Serbia. But it would have remained a pipe dream without funding.

Fortunately, Hofma met Nick Morrill, managing partner of specialist private equity firm Rutland Partners. The pair hit it off immediately and Morrill agreed to back the deal, as long as Hofma put some skin in the game.

The deal took 18 months to complete and is swathed in non-disclosure agreements, but rumour has it that Rutland picked up the rights to Pizza Hut dine-in for just one pound.

It did, however, have to put aside a more substantial £20m for refitting the restaurants and refreshing the brand.

Hofma is adding a further £3m of his own. However, it may be that Hofma has bagged himself a bargain. In the casual dining market, Pizza Hut remains the third most popular choice for consumers (so says the 2012 Peach Brandtrack report).

Its Facebook page boasts more than 10 million likes. It might not be too long before it’s turning a profit again.

He had better hope so, anyway, as his exit route is not obvious. ‘I have my five-year plan,’ he says, ‘and after that, I don’t know. I could stay on indefinitely.’

Faith in the basic offering is presumably why Hofma has made only small tweaks to the menu (there are a few healthy options now for that pitifully conflicted creature, the calorie-counting pizza lover). He pooh-poohs any suggestion of bringing in a celebrity chef – ‘we’re not posh and we don’t go in for gimmicks. Pizza Hut is about an affordable, fun experience, not Marco Pierre White.’

But shouldn’t he really be trying to shake things up a bit more? MT columnist Luke Johnson, whose Risk Capital Partners was one of the bidders for Pizza Hut two years ago, thinks he should, but points out a major reason why he might not be able to.

‘I thought that we could buy it for very little and the challenge of turning it around appealed, but the thing that put me off most was being a franchisee of Yum!,' Johnson says. 'The business needed serious reinvention and I would never have been allowed to be as radical as I wanted to be.’

Insiders say that the Hut is aiming for a profit of around 5% of turnover. And, unlike many other restaurants, Pizza Hut has refused to play the dangerous discounting game that is so eroding their margins.

So rather than run endless voucher campaigns, Hofma is engendering loyalty by making the salad bar free with a main course, and offering free refills on soft drinks.

‘Less money off, more extras you can count on,’ he says, with his ‘good guy’ twinkle. Is it really that simple though?

As snow begins to fall outside, Hofma caves in. ‘Okay, okay,’ he says. ‘I’m not a total purist. On days like this, it’s grim and people won’t be out so it helps to do a bit of discounting. Give people a nudge.’

It’s yet another inconsistency from a man who has already proved to be a mass of contradictions. But, it’s our inconsistencies that make us human.

So, next time you pop into Pizza Hut, look out for the waiter. You might just be getting served by the boss.

 

HOFMA IN A MINUTE

1965 Born in the Netherlands
1980 Moved to a remote mountain village in Switzerland – ‘I hated my parents for it’
1989 Receives a BA in economics from Universität Freiburg and joins Nestlé as an internal auditor – ‘It doesn’t get more left-brain that that’
1993 Finance director, Nestlé
1998 MBA at IMD in Lausanne
2002 Joins management consultancy McKinsey
2009 February, becomes general manager of the Pizza Hut UK dine-in business 2012 November, stages an acquisition-meets-MBO with Rutland Partners – ‘I’m an entrepreneur now’

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