Pizza Hut's Biggest Franchisee Says Company Needs to Up Its Digital Game NPC International's net income dropped 77 percent in the first quarter. And it blames Pizza Hut's lack of digital innovation.

After a rough first quarter, Pizza Hut's biggest franchisee wants the chain to carve out a bigger slice of the digital pie.

NPC International Inc. says Pizza Hut's lack of digital innovation is hurting sales, reports Nation's Restaurant News. NPC reported a 77.7 percent decline in net income in the first quarter, which fell to $3 million from $13.2 million in the same period last year.

"We must strengthen the brand's connection with the millennial generation and drive greater consistency among our value and service offerings," NPC CEO Jim Schwartz reportedly said in a conference call with analysts. "Digital drives greater loyalty, and it drives greater activation, and in many cases, consumers can find the best value in respect to the offerings embedded in digital.

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NPC owns 91 Wendy's units and 1,263 Pizza Hut locations, a huge chunk of Pizza Hut's 7,304 U.S. locations.

Last quarter, Yum Brands reported that Pizza Hut's restaurant margin decreased 4.2 percent and operating profit decreased 14 percent. Overall, however, the chain was able to post a 4 percent jump in worldwide sales, due in part to a strong performance in China.

In the past, Pizza Hut has been known for its digital innovation. The world's first online purchase was even a Pizza Hut pie. However, while the chain tries to stay on top in digital marketing in 2014 with interactive ads on Hulu and a recently relaunched ordering website, the competition is stiff. As more and more customers order online – Domino's generates 40 percent of U.S. sales through digital channels – the need to innovate digitally becomes more important than ever before.

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