Better late than never '... Figaro's Pizza adds delivery

Better late than never '... Figaro's Pizza adds delivery
December 26, 2004

Figaro's Pizza now delivers.

Big whoop, right?

It is if yours is a chain that began a quarter century ago as a take-and-bake-only pizza company, which added baked pizzas in 1996.

Regardless of whether adding delivery after 24 years makes Figaro's a slow learner, the people running the 53 units that took it on this year call the move better late than never. Not so long ago, most of them never even considered delivering.

"When I bought the company four years ago, delivery was expressly forbidden," said Ron Berger, CEO of the 95-unit, Salem, Ore., chain. "That Figaro's didn't deliver was attractive to operators who didn't want to deal with it."

"It" being the expense, the staffing, the insurance ... all the usual hassles, Berger said. Plus, the company's previous owners viewed delivery as unprofitable. "There was a belief on the part of my predecessors that adding delivery would significantly alter the pricing model, that you couldn't make it work financially for the franchisee."

Au contraire, said Mike Fitzgerald, when he joined Figaro's as its national director of field operations 14 months ago. In his years at Round Table Pizza, Fitzgerald saw that pizza company add delivery and succeed with it.

"At Round Table back then, when Domino's came in and Pizza Hut opened up in our area, our volumes dropped like a stone," Fitzgerald said. Round Table countered with its own delivery program and sales returned.

When he came to Figaro's and suggested the same, the company was less than receptive.

"A lot of the franchisees didn't like the idea, but I guess I'm too dumb to take no for an answer," he said. Berger wasn't convinced either. "Ron wanted me to prove to him that this would work. He said, 'It's great if you can make $20,000 a month in delivery, but if it costs you $22,000, what's it worth?' "

About a 25-percent boost in business, according to Cindy Egnarski, a single-unit franchisee in Green Bay, Wis. When Egnarski began testing delivery in March, the experiment went so well she jokingly threatened to harm Fitzgerald if he took it out.

"It has been really good for business," said Egnarski. "The costs are there to start it up, but the increased sales have more than made up for it."

'Talent' search

Figaro's launched its delivery test last year in the tiny town of Talent, Ore., pop. 6,000. A multi-unit operator there had always been interested in delivery, Berger said, and the company saw an opportunity to conduct its experiment below competitors' radars.

Almost immediately, revenues rose 50 percent, the bulk of which came from new customers who specifically wanted delivery.

"We found that delivery customers and takeout customers are very different people," Berger said, adding that the company charges $2 for delivery. "Sure, there are some crossover customers, but we found that a lot of people were fine with paying a premium for delivery."

After 10 months, the test was extended to a few more stores, and expanded at the rate of about 10 stores at a time thereafter. By October of 2004, when 30 Figaro's units were delivering, the company's board of advisors green-lighted a systemwide rollout.

According to Berger, the per-unit investment for adding delivery ranges from $6,000 to $26,000. The wide disparity centers on the cost of adding a company-approved $20,000 Speedline POS system.

Once an operator decides to add delivery, the company provides a delivery manual which specifies all procedures and equipment needed. A local-store marketing plan is drawn up, and a training period (typically about a day and a half) is scheduled with a Figaro's trainer.

To ensure pizzas arrive piping hot, Figaro's limits delivery areas to no more than a 5-minute drive in any direction from a store.

"Research has shown that if you go past that 45-minute window for pizza delivery, the customer is going to be upset," Fitzgerald said, adding that Figaro's shoots for delivery times of 25 minutes or less. "I'd rather have a significant portion of the customers in that limited service area than a smaller share in a larger area. If we see a need to deliver further away, we'll consider putting another delivery-only unit in there."

Egnarski, who owns the master franchise rights for the state of Wisconsin, called Figaro's delivery program "very straight forward" and an easy way to grow the business. Finding and keeping drivers hasn't been a challenge, either, she said. "The best advertising vehicle for (drivers) is word of mouth. That's how we've gotten all of ours."

Though her franchise charges a $1 delivery fee, driver tips haven't suffered, she said.

While Figaro's franchisees continue to add delivery, the system won't be 100 percent delivery anytime soon, Berger said. Those who signed on before the delivery test can choose to follow their old franchise contract, which forbade delivery. Everyone else added henceforth, he said, must deliver.

"There will be some owners who will resist — a few of which could make a very convincing case that delivery will not help them at all," said Berger. "If your store is in an isolated community where you're convinced you have 100 percent of the pizza business, it wouldn't make sense to add delivery. But as far as the future, we're convinced this is the way to go."