 |
| |
 |
|
|
|
|
COVER
STORY - September
2001 by Susan Gosselin Sidebar-
Because it’s big business. Though hamburgers may still top the sales charts, consumer surveys consistently show pizza as America’s fast food of choice. With so much dough on the line, is it any wonder that three of the nation’s fast-growth pizza companies – Louisville-based Papa John’s, Pizza Magia and Pizza Hut – would compete so fiercely for your dollar? The legal battle over Papa John’s “Better Ingredients, Better Pizza” slogan went all the way to the U.S. Supreme Court before it was resolved this spring. Papa John’s has also been crying foul over the defection of its former president, Dan Holland, who became CEO of new Pizza upstart Pizza Magia five years after retiring from Papa John’s. But beyond all the headlines and hype lie three very strong, fast growing, and essentially different companies – all with roots in Louisville. While the legal wrangling over their similarities is beginning to die down, what makes each company unique is what has fueled their successes. Pizza
Hut
That’s pretty heady stuff, considering that Pizza Hut started in Wichita, Kansas 43 years ago by two brothers in college who just wanted to open a pizzeria. “I think our founders would have never dreamed any of this would happen,” said Rich Matteson, director of brand marketing and promotions for Pizza Hut. “They just thought they would cash in on America’s growing interest in pizza and bummed $600 from their mother to open their pizza parlor. Today, Pizza Hut has literally changed the fabric of casual dining in many markets. More than 80 percent of the population eats pizza today. It’s looked at as a convenience, a home meal replacement, and that is in large part because Pizza Hut has been there to provide them with a quality, reliable product.” Outside of its historic role bringing pizza to the masses, Pizza Hut draws a clear distinction between itself and its competitors. “We differ from our younger competitors because we started as a dine-in concept, and that’s still a very big part of who we are,” said Patty Sullivan, director of public relations for Pizza Hut. “But as the market has changed, and the idea of home meal replacement has taken off, we’ve been seeing most of our growth in our delivery/carryout business. We’ve been working hard, too, to offer a quality product in as many different formats as possible.” In fact, consumers can now find Pizza Hut pizza in airports, school cafeterias, baseball stadiums, truck stops and at 550 “multi-concept” restaurants featuring Pizza Hut with a combination of Taco Bell or KFC or all three. Options like these are particularly attractive to franchisees, who may want to forego the expense of opening a full-fledged Pizza Hut dine-in restaurant with delivery service. “We’re offering franchisees more options than anyone in the pizza business. They can choose from a wide variety of price tags, yet still get a quality Pizza Hut product and the power of our brand,” Matteson said. The Pizza Hut brand has grown, he added, because of the restaurant’s commitment to firsts – another thing that sets it apart from other pizza chains. Pizza Hut first introduced its Pan Pizza in 1980. Its Stuffed Crust Pizza was a first of its kind concept and one of the most successful product launches in Pizza Hut history. In fact, Pizza Hut uses 50 percent of the 35 million pounds of string cheese produced in the U.S. every year, just to put in the stuffed crust. Pizza Hut now sells the industry’s largest variety of crusts. Pizza Hut’s depth of locations and high sales levels makes it a cross-promotional marketer’s dream come true. During its promotion for the NCAA Final Four in 1994, Pizza Hut temporarily became the single largest retailer of basketballs in the United States, selling 3.7 million balls for a special promotional price. When Pizza Hut entered a promotion with CD Now, allowing Pizza Hut customers to burn a free CD with music of their choosing from the CD Now website, Pizza Hut earned an honorary gold record for distributing more than a million CDs. And the company is well known for its ability to leverage current events and turn them into system-wide promotions very quickly. After launching the “Insider’s Pizza” in September 2000, the company quickly put together an ad campaign that used the uncertainty of the election results to drive awareness of their pizza. “We put a big emphasis on being the first to market with new ideas... it’s the cornerstone of our value proposition for the customer,” Matteson said. “When a customer comes to Pizza Hut, we want them to know they can always find something exciting and new.” Pizza
Magia
Though Pizza Magia is strictly a carryout and delivery business, Holland says his product stands out because they are the only pizza chain delivery concept with such a diverse menu. Pizza Magia customers can enjoy everything from pizza to stromboli, dessert pizza (named – what else – the “sweetie pie”), chicken wings and breadsticks. But as a former president for Papa John’s, Holland has been accused of making a pizza that bears more than a passing resemblance to Papa John’s famous “better ingredients” pizzas. “This will all come out in the lawsuit, but in my opinion, the only thing that is similar is that we’re both making pizzas. We have a spicier sauce, we have cheese up to the edge of our pizzas, while they have a clean edge. The taste and appearance are totally different,” Holland said. And while taste will always be the number one consideration for any pizza buyer, Holland says he wants Pizza Magia to be known as the value provider in the industry. In fact, Pizza Magia pizzas generally run about $1 less than its competitors, though the company says it plans to leave the low-cost leader position to Little Caesar’s. That cost savings, Holland says, comes from its young and nimble corporate status. “We can offer a franchise for about $140,000 – about half what you’d expect to pay for other pizza franchises. And our ‘break even’ rate is much lower. You have to sell $9,000 worth of pizza a week to break even at one of our restaurants. At others it might take you up to $12,000 in sales to break even. One of our stores averages about $500,000 in sales yearly. That’s an important profit potential for new franchisees.” Holland said that the company’s strategy is to go for slow, controlled growth. He’s targeting cities in neighboring states to Kentucky to start, focusing on cities that don’t have a strong regional chain or mom-and-pop shop players. He plans to open plenty of corporate-owned stores, in addition to franchises. Because of the company’s size, Pizza Magia is not yet in the position to take on Papa John’s and Pizza Hut in television advertising. “TV ads are out of our reach right now, but we have been doing more grass roots marketing. We donate to causes within a two-mile radius of our stores. We offer coupons regularly – about 80 percent of our business comes from that. We’re in the streets, in hand-to-hand combat in a very tough segment.” Papa
John’s Since the company first began in a broom closet in 1984 at Mick’s Lounge in Jeffersonville, Ind., it was dedicated to doing what no one else was doing – delivering premium quality ingredients in pizza. After selling his car to buy the industrial oven, college student John Schnatter founded Papa John’s as a way to help his father’s pub offer something different. But soon, the pizza became the main attraction and Schnatter set about opening as many stores as the market would bear. Today, Papa John’s is the third largest pizza chain in the world, with 2,890 Papa John’s restaurants, both franchise and corporate owned. The company also acquired the Perfect Pizza chain in the United Kingdom, with 205 restaurants. For the second year Papa John’s was named #1 in customer satisfaction among all fast food restaurants in the American Customer Satisfaction Index. Their stores are in 49 States and 10 international markets.“Our success all comes down to focus,” said Chris Jacobsen, senior director of marketing and internal communication for Papa John’s. “When we say we use ‘better ingredients,’ we mean it.” In fact, Papa John’s has actually trademarked the special baby portabella mushrooms that go on their pizza, calling them “baby papabellas.” Their olives are produced just for them in Spain. Their ground beef topping is 100 percent beef and the sausage is 100 percent pork, made without fillers of any kind. This philosophy extends to the expectations Papa John’s has for its staff, as well. “Culturally, there are only two jobs at Papa John’s – the pizza makers and those who support the pizza makers,” Jacobsen said. “Our managers don’t spend long hours in the backrooms poring over paperwork. Instead, they’re out front with the rest of their team, interacting with customers and personally ensuring a quality product is being produced at every stage of the process.” For proprietary reasons, Papa John’s would not discuss its relationship with its franchisees, or what makes their business model competitive with other franchise opportunities. When
it comes to their competition’s advertising, well,
they just don’t have the time to give it much
thought. “Honestly, we don’t have an opinion
about our competition’s advertising. Again, it goes
back to focus,” Jacobsen said. “We choose to
focus on quality, which is why our advertising tells a
quality story rather than having a highly promotional,
limited-time only kind of theme. We’re just doing
what our competition is doing...finding what we do well,
and concentrating on doing it better than anyone
else.” Susan
Gosselin is a staff writer for The Lane Report. |
|
|
Copyright 1996-2001, by Kentucky Business Online. All rights reserved. Editorial
content is copyright 2001, Lane Communications Group The Lane Report is a trademark of Lane Communications Group. All other trademarks are the property of their respective owners. |
Dough, sauce, cheese
and a few pretty standard toppings. If that’s all
there is to pizza, then why has the pizza business become
so complicated?
With PepsiCo’s
spinoff of its restaurant concepts in 1997, Pizza Hut
joined its corporate siblings as part of Tricon Global
Restaurants, Inc., which set up residence in Louisville,
Ky. Pizza Hut’s day-to-day management for North
America, however, runs out of its headquarters in Dallas.
The merger of these three restaurants made Tricon the
largest restaurant company in the world.
“Sure, starting
in the Louisville area made it tough, because the market
is so saturated. But we figured if we could make it here
first, it would silence a lot of the critics who would
say it couldn’t be done,” said Dan Holland, CEO
of Pizza Magia.