Choosing a branded pizza partner means balancing a complex equation that weighs such factors as product quality, financial and logistical considerations, marketing programs, employee training, ongoing support, brand equity and local competition.
Suddenly, a cheese pizza isn’t so simple any more. It’s a complex decision that must be made carefully, said Dan Rotherham, director of operations for Stop ‘n Save, a division of Feather Petroleum Co. in Grand Junction, Colo., and a Hunt Brothers Pizza operator. "By partnering with the wrong company, one that has no follow-up, retailers may be choosing a company that only tells them good things that they want to hear. They may simply want to stroke you even though things could be a lot better."
Rotherham’s own experience with a previous branded pizza partner brought him to this insight. "They would come in, look around, and tell me how great everything looked," he said. "Then I would come in afterwards and realize that things could be a lot better."
Stop ‘n Save has five Hunt Brothers operations among its 18 stores, with another due shortly and, by the end of 2009, the possibility of as many as 10.
Know Your Options
As with all foodservice concepts, there are many pizza brands to choose from.
"I was looking for something to put in my stores that wasn’t necessarily a franchise," said Sandy Arrasmith, vice president and co-owner of 34-unit operator J&H Oil Co. in Grand Rapids, Mich., which has a working relationship with Piccadilly Pizza. "Eleven of my locations already had a Subway in them, and I couldn’t put a Subway in this one particular area since there was already another franchisee there. I was looking for something branded with appeal."
The deal that brought them together was the retailer’s first foray into branded pizza. The company’s first Piccadilly unit opened about a year ago. Today, there are 13.
Flexibility was important. "We have not done a franchise with Piccadilly yet, although we have entertained the idea about other locations," Arrasmith said. "That’s what I like about their program: you can do a branded program without having to be a franchise. They have a couple of different levels that you can work with."
J&H owns and operate its equipment, which helps cut down on cost, and buys the product through its wholesaler, S. Abraham & Sons, Inc. Piccadilly makes its money through J&H’s purchase of its products through the wholesaler. There are no marketing fees. In fact, J&H earns a 2% rebate on all of the products it buys. Management spends those monies on marketing or specials, or occasionally on motivational contests for employees.
"One of the biggest benefits of going with Piccadilly was that our current wholesaler was already working with them," Arrasmith said. "They used to have a different program and they substituted the Piccadilly brand for it. I think it was mostly because of name recognition. People have heard of Piccadilly pizza and it is a great product. I like it because it’s not too complicated a program for my employees to work with."
It was also a comparatively inexpensive option. "I had to buy some equipment to support the program," Arrasmith said, "but it was a relatively low investment. It varied store to store because they helped me buy some good used equipment."
The average cost per store turned out to be roughly $5,000 to $7,000. The biggest cost came in purchasing a convection oven and a two-tier warmer unit. The startup costs included a standard POS system that integrated into the chain’s current system.
Support was also crucial. J&H’s Piccadilly rep, Dave Benge, "spent a lot of time in our stores training our people, showing them how to properly prepare the product and how to market it." Arrasmith said. "He and I just did some store tours a few weeks ago to check for product quality and consistency. If he sees something that is not quite up to standard he will give me a call and we’ll work with the staff on making those improvements."
Mike Harrell, president of Jernigan Oil Co. Inc., operates 25 Duck Thru convenience stores in Ahoskie, N.C. Like Arrasmith, he wanted a pizza program that had strong brand recognition in his markets, but didn’t want to be saddled with a costly upfront investment and monthly franchisee fees because his stores don’t generate the volume required to be profitable with a national brand. But he also didn’t want to sacrifice quality or variety.
"We operate in rural towns so we’re fortunate not to have a lot of foodservice competition at some of our stores. This gives us an advantage, but also comes with a lot of responsibility," Harrell said. "We can’t just offer a simple variety. It has to be fresh, innovative and affordable enough to attract the customers day after day."
Duck Thru chose Hot Stuff Pizza from Hot Stuff Foods because they only require distribution agreements, not monthly licensing or franchise fees. "Our support has been excellent on all levels," he said. "A Hot Stuff rep is in our stores about once a month monitoring our consistency, offering suggestions and elevating our entire platform. They have exceeded my initial expectations."
Telling it Like it Is
A good partner, Stop ‘n Save’s Rotherham insisted, "tells it like it is. It hasn’t happened in any of my locations, but I have heard from other retailers that if they come in and your kitchen is not up to their standards you’ve got to react."
Stop ‘n Save has been proactive, remodeling every new Hunt Brothers location as well as a couple of existing sites.
The cost of each unit’s remodel, not counting equipment, has been about $2,000. The cost of the entire pizza equipment package, everything included, is about $12,000 per store.
Stop ‘n Save is not a franchisee; it uses its own people and equipment. The only monies it sends to Hunt Brothers are for product and equipment.
Initially, Rotherham said, what got him interested in Hunt Bros., was its product quality, but what sealed the deal was the brand support. "When it comes to training, they spend as much time as is needed. They do not let a sales associate near the pizzas until they have watched a video and been trained properly. Then they do on-site observation and follow-up. They will even come in and train a new hire if you ask them to."
Reasons Not To
Ankeny, Iowa-based Casey’s General Stores’ prepared-food program has always been a proprietary one, said William Walljasper, senior vice president and chief financial officer. "To my knowledge we have never looked to a third-party vendor, like a QSR arrangement. I can tell you that the margin differential is significantly different between a co-branded arrangements and a proprietary arrangement."
In other words, it’s not sharing revenue, which leaves more in the till. "We are vertically integrated in that regard, and we want to make sure we oversee the quality of our food product," Walljasper said. "That’s always been what differentiates us."
Another reason Casey’s is not looking for a co-branded pizza partner: "We are a brand in our area," Walljasper said. "The only way we would even consider that would be if we expanded very rapidly into another area, just as we did with the Blimpie’s being part of the acquisition. We evaluated how they were doing financially and decided this would be a good way to test the waters."
Typically, Casey’s strongest competitor is the local pizzeria, but it also battles Pizza Hut, Domino’s, Papa Johns and Papa Murphy’s. "We think we’re a pretty high-quality product," Walljasper said, "so we certainly would put our product up against any of those."
That’s something every c-store operator does, whether they realize it or not. CSD