Costa Anastasiadis canÕt remember a moment when he and his cousin, Michael Logos, decided to go into business together, it just happened.
“We are a family with a southern European background, weÕve all grown up together. Crust for us was a natural evolution, and our partners have experience in fast food and retail food,” says Anastasiadis. “MichaelÕs my older cousin, my brother (Terry Anastasiadis) is a natural numbers man and heÕs our financial controller.” The other founders are Peter Augoustis and Peter Koutsovasilis.
What was identified was a market for a standout pizza offering with an open style kitchen allowing customers a full view of the food preparation.
The first store opened in 2001 in the inner west Sydney suburb of Annandale. Nine months later a second store opened in Richmond in Victoria.
Despite the shared background in food businesses, the co-founders discovered running their own operation was still a huge challenge. Says Anastasiadis, “This was a different beast. We didnÕt know what we were doing, we were 23 and 27, very green but with lots of energy and passion. WeÕve got marketing and HR teams now. When we started we were just two guys and their guts.”
Instinct has served them well and listening to customers has been an important part of the brandÕs development. “We knew the product offer was what would keep customers coming back, he says. “The no-nonsense approach means you canÕt get away with a second rate product if itÕs all on display.”
Customer demand for a healthier alternative drove the introduction of the gluten free pizza. The next product-based move that would distinguish the brand was to get the pizzas tested for nutritional value. With a favourable outcome the brand stacked up well against the competition, says Anastasiadis. Well before the talk of legislation to serve up nutritional information alongside the product was raised, Crust published the pizzasÕ vital statistics so customers could make informed choices.
But the big win was gaining The Heart FoundationÕs Tick, a coup that put the pizza brand on the map as a healthier option. [Changing its focus to food ingredients, the Foundation is withdrawing its Tick from fast food outlets from mid 2012.]
Expanding the model
Clever marketing has helped grow brand awareness and Crust reached a point when big decisions about expansion needed to be made. “We were gaining some real momentum as far as stores go. It doesnÕt take a lot; five or six stores, and all of a sudden people are wanting to be part of it. We looked at the franchise model because we didnÕt have capital and knew weÕd struggle to meet the quality of service and product if we added more company stores. It would have been a nightmare.
“We spent a good nine to 12 months setting up the agreement and the manuals. We went from being store operators to doing an MBA in franchising!” he jokes.
But the option of franchising outlets is in itself not a low cost choice; Crust was able to fund the migration to a franchise model in 2007 because the business was already successful. The company spent in the region of $250,000 and Anastasiadis admits he didnÕt really see the value straight away.
And the move to franchising wasnÕt always easy. “ItÕs been a grind at times,” he says. Entering the franchising arena required a different mindset, with a new emphasis on corporate infrastructure and business planning. But Anastasiadis strongly believes the companyÕs progression so far is evident of the ability to adapt.
Product diversity has now been matched by innovation in the franchise system. The slice model, which serves a pizza portion in a high footfall zone, has been developed to maintain the integrity of the product while putting pizza in a fast food court. The flagship is in WestfieldÕs Sydney centre, with a second outlet located in the Macquarie Centre, catering for a younger demographic. ThereÕs been interest in other Australian airports after the launch of the model into the Sydney International Airport food court.
ItÕs an in-between model that could add another 20 to 30 outlets to the Australian portfolio, bringing it to 200. Regional opportunities are focused on the original takeaway model and Anastasiadis estimates there are only 12 to 15 outlets to be developed outside the metro centres.
“We want to open up stores that will make money,” he says. “WeÕve got very high turnovers in our stores, twice the industry average. In food the best profit level would be 25 percent and some of our owner operators would be taking between 15 and 25 percent of turnover in profit.”
Relationships
Anastasiadis is equally pleased with the relationships enjoyed between franchisor and franchisees. “There are no franchisees in the system causing real issues. Most of the time weÕve resolved our differences very quickly, theyÕve usually been caused by miscommunication. We are proud of our track record of no disputes with our franchisees.”
A sign of confidence in any franchise brand is exhibited by the presence of multi-unit operators and for Crust multiple ownership is welcomed and examples include family-run operations with various siblings owning three or five stores in a partnership. The latest recruit to the Crust portfolio, which brings the store count to 100, the Robina outlet in the Gold Coast, is run by a couple from Sydney who already own the Dee Why store on the cityÕs northern beaches.
“Damian and Rachael are a great example of franchisees with a skillset that is way beyond the operation of just one outlet,” says Anastasiadis.
For Damian Richens, who will spend six months building the Robina store while Rachael Humphries keeps an eye on the Dee Why outlet, the Crust model has been a passion. “The model is great. We started to eat the product and loved it. We were looking for a franchise and liked the transparency of product, that the ingredients are on show. TheyÕre market leaders, they were first with the Heart Foundation Tick and the coeliac association.”
Humphries has been a fan of the support available to new franchisees. “The first time we met we liked them, and the support we got from the founders is fantastic. ItÕs still run like a family business.”
So where next?
Fifty extra stores are planned in the next 18 months but one of the key challenges facing Crust is reaching saturation point in Australia. “If we donÕt innovate we could stagnate.”
Overseas expansion has started with two stores in Singapore, managed as a joint venture with an existing Sydney-based franchisee partnership, and New Zealand is next. Down the track the Crust brand will be launching into the US market with an initial store in Los Angeles.
The big draw is the size of the population, over 311 million. “I got a shock at how big the business is in the US, with some individual franchisees having 100 stores, itÕs astounding. WeÕve aligned with the strongest company, who are in retail food and really understand the brand. From the point of first contact to an agreement it took 18 months. WeÕre aware it will be tough but weÕre confident our product offer can make waves out there.”
This will prove a huge test of the adaptability, commitment and resources of the Crust business. But, says Anastasiadis “WeÕve never been shy of a challenge.”