Despite doubling system in 5 years, Marco's Pizza CEO wants more

 
Feb. 15, 2013 | by Alicia Kelso

The Marco's Pizza franchise system has doubled in size in less than five years. Jack Butorac, CEO of the Toledo, Ohio-based chain, attributes the rapid growth to the company's "infrastructure."

Specifically, Marco's has about 55 area reps in place throughout the country actively seeking out franchisees who can operate at the company's standards level. Subway, Butorac says, became the largest restaurant chain in the world by using this same strategy.

The AR plan helped Marco's open 61 new locations in 2012, with plans for 104 more this year. Still, Butorac admits such numbers are "disappointing."

"We've got such a pipeline full of applicants and leases and it just takes time to get through bureaucracy," he said. "There is a huge amount of interest right now in the Marcos' brand and as we go through potential franchisees, a lot of them are qualified. We've just got to find them somewhere (to operate). We have a lot more opportunities out there than 104 stores this year."

Butorac's ultimate objective is to become the fourth largest pizza chain in the U.S., behind Domino's, Pizza Hut and Papa John's. Marco's would have to surpass many other big players to reach the No. 4 spot, including Little Caesars, Papa Murphy's, Chuck E. Cheese's, Sbarro and CiCi's.

He also wants to hit the $1 billion sales mark (only Pizza Hut, Domino's, Papa John's and Little Caesars have done so). Revenue-wise, Marco's ranked No. 19 in 2012, with about $144M in sales, according to data from Technomic.

Butorac is optimistic about the daunting task.

"We're doing very well, our same-store sales are up and when we open up in more markets, interest in the brand magnifies," he said. "And (founder) Pasquale Giammarco created a fantastic product. Our team just needs to replicate what he created across the country."

The expansion strategy

Marco's is now in 26 states and is just starting to penetrate the West. The current push is to expand in Florida and California. The brand's strongest markets are in the Southeast and the Midwest, as well as Oklahoma and Texas.

Beyond 2013's goal of 104 new units, Butorac is aiming to open 153 new stores in 2014, followed by 230 in 2015.

"We have a five-year plan to get to (fourth largest). With all the area reps we have, they each need to open four stores. That's easy to do, especially if you have a franchisee out there that's got multiple stores," he said.

In addition to expanding through its AR network, Marco's also intends to leverage its fledgling partnership with Family Video to grow its footprint. In February 2012, Family Video announced its plans to invest $100 million to open Marco's locations near or in video stores to enhance its business. Since the first co-branded store opened in Bowling Green, Ohio, about a year ago, Marco's has added 60 locations and five states to its portfolio.

"They have 700-some locations. The founder doesn't believe in debt. They were familiar with our brand. It really is a progressive company with a strong business model and our management styles and cultures are similar," Butorac said. "It's been a phenomenal experience."

Co-branded Marco's and Family Video units typically split a building. Family Video can therefore shrink their footprint and lease the rest off to a Marco's franchisee. Since the initial agreement, Family Video's same-store sales and revenues have increased and a "huge number" of co-branded stores are planned in a short period of time, Butorac said.

Keeping it consistent

Other keys to Marco's ambitious growth include:

  • Maintaining product consistency. "Product is key," Butorac said. "Our product is well received across the country, so we need to make sure it's the same in Bowling Green (Ohio) as it is in Louisville (Kentucky)."

Butorac adds that Marco's is rolling out salads nationwide, and will also focus on sub sandwiches in the Midwest markets. "The salads and subs have been a part of Marco's menu for 15 years. We've just upgraded them. Before, they were good, just not Marco's good. Now they fit," he said.

  • Focusing on store-level profitability. Marco's has put together a task force that looks at every line on a PNL, every dollar spent and how the company can improve profitability without compromising its product. That could mean renegotiating contacts, relocating stores, etc.

Butorac also said the company spends a lot of time managing commodity prices. "We have our own distribution company and can buy several months' worth of a product so our franchisees won't feel price increases if they're coming," he said.

  • "Smart marketing." Finally, Butorac said it is important for the company to continually market its differentiation in a crowded pizza segment.

"We are authentic Italian. When you walk into one of our stores, you will have the perception that it's a quality product. Our dough is made fresh daily, our cheese is fresh, our sauce is an Italian family recipe. Our meats are hearty," he said. "Communicating those differences is a big focus of ours."

When Marco's first opened in Toledo in 1978, Giammarco avoided TV advertising. Now, the company has regional ad funds that primarily go toward TV, as well as print, social, billboards, etc. Also, Marco's now has a point-of-sale infrastructure in place that can mine customer data for future marketing.

"We are really mining that data. We want to know who you are, what you're ordering, what you're not ordering, how much you're spending, how much you're coming in. This way, we can tailor offers to entice you to buy new or more things," Butorac said. "You have to listen and monitor what your customers want in order to get them to come back and tell others to come in."

Read more about operations management.


Topics: Business Strategy and Profitability , Food & Beverage , Franchising & Growth , Marketing / Branding / Promotion , Operations Management


Alicia Kelso / Alicia has been a professional journalist for 15 years. Her work with FastCasual.com, QSRweb.com and PizzaMarketplace.com has been featured in publications around the world, including NPR, Good Morning America, Voice of Russia radio, Consumerist.com and Franchise Asia magazine.
View Alicia Kelso's profile on LinkedIn

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