McDonald’s franchise agreement with Pizza Hut, the first franchise to be purchased by the fast food giant in more than four years, is worth an additional $4.6 billion in gross profit, according to a new report from FactSet.
The deal was approved by McDonald’s board on Thursday and will give the company a majority stake in the franchise chain, according the company’s latest financial report.
Pizza Hut will be the second franchisee of the company, following Burger King.
The company is making the transaction to ensure that it has a foothold in the fast-food industry, which has been struggling to make inroads in the burger and breakfast category, which accounts for a third of McDonald’s total sales.
McDonald’s had more than 1,800 franchisees in 2017, up more than 30 percent from 2016.
The acquisition of Pizza Hut will also allow McDonald’s to expand its franchise network and broaden its distribution reach, which had been limited by a limited McDonald’s service area in rural areas of the U.S.
The new franchise agreement will allow McDonald to further expand its distribution footprint in rural and low-income areas of America, where the company previously did not have a presence.
In addition to Pizza Hut and its other U.K.-based franchisees, McDonald’s has also bought franchisees of KFC and Burger King in recent years.
McDonald’s franchisees earned a combined $5.1 billion in 2016, up almost 20 percent from the year before.
It also earned a record $3.7 billion in 2015, the most since 1999.