15 minutes with Donatos CEO Tom Krouse

Oct. 12, 2010

Tom Krouse, unlike many foodservice industry leaders, has had a good year. Krouse, last week crowned Donatos new CEO, has led the pizza chain's new retail distribution arm, Jane's Dough Foods, to double-digit growth in the last year, having tripled the number of customers served. Jane's Dough has achieved success especially by developing private label take 'n' bake pizza for grocers such as Kroger, and other, more uncommon channels. By now, retail commitments are at 1,400 points of distribution in the United States.

Krouse says his appointment was part of a plan to "put the right leadership in the right place at the right time," a strategy started when Jim Grote and Jane Grote Abell bought the company back from McDonald's in 2003. Krouse proved himself for the task most recently with Jane's Dough's performance, which will continue to be a primary focus for the leader moving forward.

In this Q&A, Krouse sheds light on why demand for private label, take 'n' bake pizza is charging ahead in new markets such as the convenience store segment.  

What's the latest with R&D at Jane's Dough Foods, which you most recently headed?

We've been working with potential customers on really helping them sell more pizza, either through pizza dough products, or topped pizzas. We've had a lot of activity in pre-topped pizzas, but really been focusing on private label take 'n' bake pizzas for the c-store industry. We provide pizzas for Quick Trip, which is a 500-plus store convenience chain out west. We're also working on programs for Certified Oil and Village Pantry, and we also are a supplier of individual-size hot pizzas for Royal Farms, which is a convenience store chain out east.  

As for new products, one of them is an offering of 10 individual-size frozen pizzas, which are packaged in a convenient resealable bag. We call them Little Jimmys, pizzas that can be put in a toaster oven to satisfy snacking needs.

When we spoke last year, Kroger and the grocery segment generally were a big component of Jane's Dough Food clientele. How did the c-store connection develop, and has that segment's demand surpassed that of grocers?

We started really in a partnership with Kroger and their desire to provide high-quality take 'n' bake pizza. So over the last five years, we built that relationship up, and we're in over 400 Krogers now. As we continue to develop that and other technologies for different doughs and topped pizzas, the convenience store chain kind of developed out of that.

C-stores right now are pushing quality food offerings to drive their sales and profitability. The trends have been very positive for quality food items in convenience stores — and we're able to provide not only the pizzas, but also the marketing, distribution and operations expertise to help that segment sell more pizzas. There, we go beyond just manufacturing high-quality pizza, to helping them sell more.

Retail commitments for Jane's Dough Foods are now at 1,400 points of distribution, according to the latest press release. What retail outposts are your sweet spots, and which kinds are you trying to target more for the future? 

The other one besides the c-stores mentioned are foodservice distributors. We're providing dough products and pre-topped pizzas for foodservice distributors who will have their own customers. We already have a partnership with H.T. Hackney, headquartered here in Columbus. We're also providing all the dough for the Chicago Public Schools system.

Are you doing mostly take 'n' bake or ready-made pizzas in the c-store space? 

We're doing both; there seems to be a real interest in the take 'n' bake pizzas in the convenience stores, and in many ways that's been a great advantage for us. It's a good way for them to provide a high-quality alternative to frozen pizza. Many of the c-store brands are trying to create their own brands of food, so we fit in with that. And yes, we're also doing hot pizzas as well.

I know they're difficult to compare, but how is the retail distribution end of the business performing, and how does it compare to Donatos' franchising trajectory?

We've been able to grow on both sides: On the Jane's Dough side, certainly there's a lot of demand from c-stores and grocery stores. But we also have a lot of demand on the restaurant side for Donatos because of its quality differentiation. And we have a very attractive financial model, low investment and with an easy operating platform for potential franchise partners to get involved. We've been opening stores (continually). 

There's some synergy between the two also. Jane's Dough Foods came out of our plan originally to provide consistent, high-quality dough for our system. As a result, we still have that capacity in our plant, so any additional business we bring into the plant brings cost efficiencies. The other synergy is in product development; some of the knowledge and expertise we have on the restaurant side transfers to Jane's Dough, and vice versa. Some of things people are looking for in Jane's Dough gives us product innovation on the other side.

What fine-tunings will you execute for these divisions as CEO?

Our executive team is one of best in the industry. So the only tweaking would be making sure when we bring on new franchise partners, that we really do the work to make sure the partnership is a good match for them and us. Franchise deals are average 20-year deals for us.

Then on the Jane's Dough side — tweaking is continual product development, and establishing ourselves in the industry. We're still a bit of a new kid on the block, so the awareness may not be as high as it (could be). On the other hand, we're still small and growing, trying to give a lot of attention to our partners.

How do you target clients who are potential matches for Jane's Dough Foods' services?

We look for customers that have similar values to ours, quality brands that match the kind of product we're offering. There are retail customers that maybe don't have as much expertise in product development or operations development or marketing; there, we can fit in nicely with what their needs (are).

How will Jane's Dough Foods evolve as you take the helm as CEO? Who will lead expansion brands?

I'll continue to oversee it. We have two excellent execs in Greg Wilkett, vice president of manufacturing, and Bob Bauer, senior vice president of business development. I'll continue to work directly with them.

Private label has seen growth in the last few quarters. What is your prediction for whether and how it might and can overtake established brands?

Well, there are some very strong pizza brands — DiGiorno, Freschetta, others. I think we haven't seen the high end yet on private label. 

Topics: Business Strategy and Profitability , Food & Beverage , Franchising & Growth , Operations Management

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