The pizza arena is now a fragmented market with smaller franchises making their mark. So what does it take to be a successful pizza operator in 2009? Domini Stuart reports.
Watching football with the boys. Celebrating the end of a hard week with your partner. Treating the kids. A family get together. Eating in or out. Theres a pizza, and a pizza experience, for every occasion. And, when people are tightening their belts, pizza is an affordable way to lift the spirits. Versatility and affordability will always make pizza an attractive option for would-be franchisees. In times of economic uncertainty, many are drawn to larger and more established brands because logic tells them these are in the best position to survive.
However, according to Kamil Kreiser, consultant at DC Strategys Sydney office, that logic only goes so far. “In tough economic times the level of support a franchisee receives is especially important,” he says. “If a small franchise is stable enough and has the necessary systems and infrastructure, the support they provide to incoming franchisees might be as high or even higher than that from a larger group because theyÕre closer to the action and more reliant on each others performance.“
Due diligence needs to include all aspects of a possible franchise including the effectiveness of the marketing strategy. While the big names can use TV and other media nationally to keep their brand top of mind, smaller brands need to be very strong at a local level. Currently, a major challenge for even the best-qualified franchisees is limited finance. “You also need to start thinking early on about how youre going to finance the business,” says Kreiser. “You shouldnt make assumptions — either about getting finance or how long it will take if you do. As banks become more cautious, even successful applications are taking longer to process.”
Business established: 1996
Franchising commenced: 2005
Number of stores: 36
Investment required: $250,000
Training: five to six weeks product training plus four to five weeks of daily support.
Interviewed: Adrian Burton, marketing manager
Obviously, the economic downturn is a challenge, but media hype beating up the worlds problems doesnt help small businesses because theres no short-term fix. For us, I think success in 2009 comes down to continuing to provide the product our customers want with our can do attitude to product and service. You really cant afford to have lapses. That means treating every customer as what I call a rock star, especially when youre a gourmet chain, like us. People come to us not just for food but for an experience.
Another challenge is the perennial problem of finding good, reliable and trustworthy staff. Delivery customers in particular donÕt care about whatÕs going on in the background. The person who answers the phone gives them their first impression of Pizza Capers and their second comes from face to face contact with the delivery person. These are the people representing our company.
For us, the best marketing tool has always been talk, talk, talk. In our mission statement we say we want all of our stakeholders — customers, franchisees and employees — to be raving fans of our business, and its working. We have never spent a dollar on advertising for franchisees and we have never exhibited at a trade show. Friends and relatives of current franchisees, past employees they see the success and want to be part of it.
Thats how we made our move into Melbourne — were opening our first store there next week. And now the brother of the person who owns our Cleveland territory is asking us to open in Canberra.
We have successful franchisees from all kinds of backgrounds — for instance, one of the partners in our Palm Beach Gold Coast store spent 25 years as a warrant officer in the army. We also have people taking franchising to the next level. Two of our franchisees own three stores each and theyre both talking about putting on their own area managers so can work on the business rather than in the business.
Pizzacutters Gourmet Pizza
Business established: 1998
Franchising commenced: 2008
Number of stores: three plus
Investment required: $250,000 to $350,000
Training: four to six weeks plus ongoing support
Interviewed: Simon Lumbroso, founder and managing director
We believe that operating a successful pizza franchise in 2009 starts with a great product. We will never stop improving the taste or our pizzas and we believe we have one of the best-tasting pizzas in the country. Our clients seem to agree — we pride ourselves on having very loyal customers. Franchisee training and support is also vital, as is a high level of customer service. Our systems ensure that all staff deliver great customer service while ensuring the highest spend per customer.
Strong branding and marketing is crucial, especially for a business such as ours where a high percentage of our income comes from delivery. Although larger groups can market nationally, we have found that well-executed local marketing and a great product will develop a strong customer base and generate the returns necessary to make the business very profitable.
We also refuse to compromise on our sites — we ensure that every operation is profitable regardless of whether it is a company or franchised site. Compared with many alternatives pizza is still a reasonably-priced dinner option. Like everyone else we have been affected by the market but are generally finding that our loyal customers are not switching from gourmet to lower price but are rather having pizza less often. Competing industries are also helping to drive demand for healthier products. Many of our pizzas are low fat, we offer gluten free pizzas and our chicken breast is free range and free of hormones and chemicals.
Anyone considering a pizza franchise should take care to partner with a franchisor with proven experience and recognition within the industry. They need a passion for the pizza business, to pay attention to detail and be prepared to focus on achieving zero compromise on quality and service. ItÕs also important to consider how well a particular system fits with their need for a work-life balance.
Eagle Boys Pizza
Business established: 1987
Franchising commenced: 1989
Number of stores: 240 plus
Investment required: from $35,000 plus GST depending on store model
Training: five weeks initially, plus ongoing support
Interviewed: Scott Hamilton, national marketing manager
The economy will continue to be uncertain throughout 2009, so pizza businesses will need a clear strategy and must continue to meet and exceed their customersÕ expectations. We ourselves are on track to open 51 new stores in 2008/2009 with 25 of these due to be open by the middle of December. We are also working through the conversion of the 35 Pizza Haven stores we acquired earlier this year.
We are finding no shortage of opportunities to grow in the current market through both our well-established store models and our new small town models. Even though there is plenty of room, I think some of the smaller franchise systems may struggle to gain critical mass in more established markets where the three key pizza players — Eagle Boys, DominoÕs and Pizza Hut — already have a strong foothold.
The labour market is still tight and this puts pressure on our franchisees to recruit and retain quality people. And, as the economy gets tougher, consumers will also be looking more and more for better value though not necessarily cheaper price. The weaker Australian dollar is continuing to affect the price of raw materials and we are working to accommodate this with smart buying, menu extension and changes to our product mix.
At the same time, weÕre seeing a strong, growing demand from consumers for quality fresh ingredients. For example, our recent promotional steak pizza range with real fillet steak was our most successful new product launch ever.
Pizza is a fun and dynamic category and an extremely fulfilling business. As AustraliaÕs fastest growing pizza franchise we can offer an extremely strong franchise system and the highest level of support from the time a franchisee first approaches Eagle Boys until the time they exit the system.
Business established: 1983 in Australia
Franchising commenced: 1983 in Australia
Number of stores: 425 plus
Investment required: $250,000 to $350,000 for a new store, $800,000 to $900,000 for an existing store producing solid profits
Training: initial training and ongoing support
Interviewed: Don Meij, founder and CEO
Like other things that people see as affordable treats, pizza is resilient — it does well in tough times as well as good times. Even in this environment I think thereÕs definitely room for smaller start-ups, which are mostly gourmet chains. They invite more people to eat pizza and that makes them very good for the industry. Weve seen them open up in our territory and they donÕt do anything to our sales; they tend to compete in the higher-price casual dining space.
We were growing well before credit crunch and have been growing well since. For us, 2009 will be business as usual — well be continuing to innovate and make sure were dong the right thing for customers. Our system is endlessly evolving and technology plays an increasingly important role.
Four years ago we invested in a new-generation point of sale system and we have finally rolled it out through the whole operation. Were now leveraging the benefits, and were continuously bolting on new technologies that make us more productive and more efficient.
We also have a lot more consumer touch points like our online business, which is currently our fastest-growing area. The Dominos site has many unique features, for instance you can track your order in real time — when its being made, when its in the oven, when its out of the door. Its convenient and easy for our customers, and our franchisees benefit because we get a much higher ticket average online.
A franchise is a major investment and anyone considering one needs to do proper research. Youre going into partnership with another company or group so you need to be sure you know them really well. There have been a lot of fly-by-nights in the past; you should look for someone with the ability to invest and be part of the future. The average life of one of our franchisees right now is over 13 years and thats a long time to be doing something you dont enjoy — you need to be sure youre signing up for something thats a comfortable fit.
Business established: 2001
Franchising commenced: 2007
Number of stores: 17 plus
Investment required: $250,000 to $350,000
Training: initial training and ongoing support
Interviewed: Costa Anastasiadis, founder and managing director
Like the food industry and business as a whole, the pizza industry must respond to the demands of customers. In the 1960s and Õ70s, brands could tell customers what they wanted. In the Õ80s and Ô90s brands started listening to what the customers wanted. Now we have shifted towards a two-way conversation where brands are continuously interacting with customers. We listen and communicate through new media such as the internet, blogs and viral marketingÉa successful business in 2009 must be in constant communication with its customers in order to survive.
In terms of the economic downturn, the feedback were getting from customers is that theyre ready to compromise on going out but theyre not ready to compromise on the quality of product. Our customers tend to be health conscious, time-poor professionals who are often juggling their professional and family life so, for them, takeaway isnt always a luxury. They want takeaway food thats convenient, high quality and good for them.
For many people the health aspect of takeaway food is becoming mandatory and, as the Crust business has been built on providing a higher quality, healthier pizza, were well placed to deliver this.
Our strategy has been to grow strategically, carefully positioning our stores to generate brand awareness and maximise market share. We have also been very selective with our franchisee recruitment, ensuring we only have the best operators representing our franchise.
Finding the right franchisees has always been a challenge so we always take the time to make sure we get it right. To any would-be franchisee, we say: do your homework and look for something which has differentiation or, if you cant be different, at least do it better and communicate that message to your customers.