Family favourites: Why Italian chains are serving up franchisee returns
Table service in a casual, family-friendly atmosphere positions chain restaurants somewhere between traditional restaurants and fast-food services.
The concept has proved successful in Australia and, according to the IBISWorld Industry Report Chain Restaurants in Australia released in July this year, that success is likely to continue. Revenue is expected to grow at an annualised 1.3 per cent over the next five years to reach $389 million.
“Rising discretionary income has been supporting growth,” says Lauren Magner, Client Relationship Manager at IBISWorld Australia and author of the report.
“Consumers are also more likely to dine at restaurants when they visit entertainment and sporting events and they’ve been spending more on these activities.”
Italian food leads the way
The menus at Italian chain restaurants are usually built around pasta and pizza with other offerings such as salads, desserts and coffee. Many, such as La Porchetta and Rozzi’s, are licensed. And Italian food is leading the field, with 40.1 per cent of the sector compared with steaks, burgers and general food at 34.5 per cent, Mexican food at 12.2 per cent, Asian food at 9.3 per cent and breakfast food at 3.9 per cent.
La Porchetta was a pioneer in the sector when it opened its first restaurant over 30 years ago. Today it’s the market leader in modern Italian casual dining franchises and La Porchetta CEO Sara Pantaleo, who joined the organisation in 1996, has played a major role in driving the brand’s growth.
She believes that consumers are increasingly looking for convenient and quality meals to help them manage their work and family commitments, and that casual dining can provide an ideal solution.
“People are turning to trusted and family-friendly brands where they can easily find nutritious, healthy meals in a welcoming atmosphere,” she says. “There’s also growing public awareness of the health risks associated with poor diet and this has led to a greater demand for healthier eating options. Brands that are meeting those demands will stay relevant.”
The Rozzi’s brand was born in 2011, franchising began a year later and there are currently 14 restaurants in the chain. Director Dean Salomone believes the concept of “fresh, fresh and fresh” is the key to success in the sector.
“One of the great things about good Italian food is that it revolves around fresh produce,” he says. “These days you can’t get away with offering bland cheese on stodgy layers of pasta and tomato paste and saying you’ve provided an Italian experience.”
“As with most other food sectors, customers’ expectations have changed, and not just in terms of how food tastes. They want to know the ingredients and where their food is being made so, at Rozzi’s, we have worked hard to design a model where each restaurant produces as much product on site daily as possible, right down to baking our own focaccia bread.”
Despite its current popularity, Magner expects to see a slowing down in industry demand with industry revenue falling to an annualised 0.7 per cent over the five years through to 2022–23. Strengthening competition is one of the biggest challenges.
“Chain restaurants compete with each other on price, menu offering, quality, customer service, marketing, size of operations and reputation as well as style, ambience and quality of service,” she says.
“They’re also subject to external competition from fast-food services, independent restaurants and cafes. And then there’s competition from consumers who decide to cook more meals at home, which is particularly common during difficult economic times.”
Increasingly sophisticated consumer preferences may also take a toll.
“A growing food culture in metropolitan areas has resulted in consumers eating more often at specialised independent restaurants that offer high quality, premium meals,” Magner continues.
“Food-savvy diners are also more likely to look at menus and peer-review sites rather than rely on the reputation of certain chains. Industry players will need to differentiate themselves through their menus and to build strong reputations.”
Demographic trends could also exert an influence.
“Chain restaurants that operate in a good location are better positioned to drive customer traffic,” Magner says. “At the moment, many chain restaurants aim to service suburban populations but changing demographics in Australia could potentially have an impact on that strategy.
Young time-poor people are expected to increasingly opt for inner-city living so, while chain restaurants are likely to establish new operations in inner-city suburbs to counter this, they would face strong competition from fast-food services and traditional restaurants.”
Managing the costs
Pantaleo cites the increasing costs of shop fitouts, rents and utilities as another serious challenge for full-service restaurants.
“That means we need to become even cleverer in the way we operate across the business to find efficiencies elsewhere, such as with improved operational procedures and staff training,” she says.
“We’re also currently working with our franchisees to upgrade waste management processes and monitoring, and we work with them constantly to review operational expenses.”
Rozzis’ leadership team is also committed to searching out efficiencies in operations, products and how they design and build their stores.
“Store designs are becoming increasingly intricate and complex to meet the demands of both consumers and landlords,” says Salomone.
“We believe in creating interesting and unique places for our guests to enjoy our Italian-inspired food and, early on, we saw an opportunity to keep build costs down for ourselves and franchise partners by directly importing our stone, timber flooring, furniture and tiles.”
Gaining customer loyalty
Pantaleo believes that, if branded networks are to continue winning brand trust and loyalty, they need to understand and deliver what customers want.
“We work hard to ensure we stay ahead of the game,” she says. “As a brand, we’ve focused on innovation and development to ensure we retain our existing customers and attract new ones.”
“We regularly update our menu to maintain their interest and also to accommodate changing tastes – for example, by introducing vegan options. Customers also turn to us when they’re celebrating special events and we need to be able to cater to their requirements.”
La Porchetta’s recent innovations include an app that makes it easy for customers to find their nearest restaurant and the introduction of home delivery.
“We know we need to provide a full-service menu range with quality meals made fresh to order and then offer those meals in the customer’s preferred way, whether that’s dine in, takeaway or delivery,” Pantaleo says.
“Brand marketing is another essential because we can’t afford to take brand recognition for granted. We need to deliver our brand message to our target customers at the right time to ensure they will continue to give us their support.”
Salomone is confident that quality will always create a competitive edge.
“Provide a great product and customers will keep coming back whether you’re part of a network or an independent concern,” he says. “And, of course, cost is another important issue. A lot of our pizza and pasta meals are priced at under $20 which makes us more affordable than many trattorias.”
He also believes that branded networks tend to have the edge when it comes to design.
“I think we pay more attention to staying current in terms of and the dining experience we provide,” he says. “At Rozzi’s we’re also very conscious of our branding. For instance, following a revamp across our network, all new stores are opening as Rozzi’s Fresh Kitchen rather than Rozzi’s Italian Canteen.”
The right franchisee
For Pantaleo, a passion for the food and hospitality industry is an essential starting point for any would-be franchisee.
“Then we look for entrepreneurial drive, good people management skills, a demonstrated work ethic and a desire to succeed,” she says. “Financial stability and capability are also important.”
In return, the La Porchetta marketing team maintains responsibility for all big brand marketing activities across multiple platforms including online, television and radio.
“We also provide our franchisees with an integrated, online local area marketing platform to order and deliver approved marketing collateral, which supports business development,” says Pantaleo.
Franchisees also receive comprehensive training.
“A six-week session covers every aspect of owning a La Porchetta franchise,” says Pantaleo. “This covers practical on-site training, including purchasing, recruitment, products, suppliers, customer service, financial reporting and marketing tips to give you all the information and skills required to run a La Porchetta restaurant successfully.”
Rozzi’s also provides six weeks of initial training with ongoing marketing, operational support and strong supplier arrangements.
“Rozzi’s is a collaboration of seasoned food and business operators who have combined their industry experience to create this fast casual dining offer,” says Salomone. “Our business model is simple, reliable and proven if you are prepared for some hard work and commitment along the way.”