Pizza operators advised to throw out expert advice, conventional wisdom

 
Feb. 26, 2013 | by Alicia Kelso

Foodservice "experts," including those of us in the media, are out of touch with restaurant operators' needs. They shouldn't be focused on emerging trends such as tableside technology or sustainability or digital menu boards, for example ... At least, according to Michael Shepherd, who owns three pizzerias in Ohio and a consulting business.

"Sustainable is good for the earth, but it's not good for my job. I've got bigger problems to worry about," he said.

Shepherd presented "The Experts ... Are They Wrong?" at the North American Pizza and Ice Cream Show last week in Columbus, Ohio. His own expertise comes from being in the pizza business for 20 years, writing the book "Growing Pizza" and generating $1 million-plus in sales per year for the past 16 years. He's also a founding member of the World Pizza Champions and a four-time World Pizza Champion.

"There are a ton of restaurants out there that are barely breaking even. But these experts are telling us we should be growing, spending and hiring more people," Shepherd said. "No, we need to be profitable. My job is to make money, it's not my duty to create jobs or to donate to charity. Everyone's been hit hard, but what about my kids?"

Shepherd outlined headlines he's seen in trade publications that "don't seem relevant" to his business or his fellow operators. They cover topics such as remodeling, international growth, consumer demand for expanded hours, the acceleration of mobile and tablet technologies and sustainable packaging.

Conversely, headlines he believes should be splashed across front pages include:

  • "Protests over low wages will continue;"
  • "Commodity pressure will continue to be a concern;" and
  • "Obamacare costs will be a concern."

"The industry may appear to be growing but they're not taking into account rising costs. Everything is going through the roof. Obamacare scares me to death. I have 70-some employees and if I don't trim hours or let some go, I'll go out of business tomorrow," Shepherd said.

Streamlining employees and zero ad spend

Shepherd added that his company is working to streamline as many positions as possible anyway, adding that it's near impossible to get "good employees now."

"And we are chronically understaffed because of it. I'd say about 15 out of 50 people are doing 125 percent of the work. My good guys are burning out," he said. "We're doing everything we can to have less staff — our menu is simpler, we have our veggies chopped out-of-house now because it takes less people, we're cross training everyone and streamlining."

Shepherd laughs at the idea that operators simply need to do a better job communicating with the younger generation. He said many of his employees just don't want to go through the minor training and testing it takes to earn more than his company's minimum $8 an hour.

"Good employees are an endangered species," he said.

In addition, Shepherd balks at the idea of spending more on advertising to grow awareness and sales. He says he's been profitable since day one with zero advertising.

"You can do a lot of things without advertising. We focus on making our customers love us, our service and our product," he said. "Word of mouth is the biggest advertising you can do. If I can get 10 people to talk about me, that will outdo any direct mailer."

For example, one of his restaurants provided free pizza to movie-goers in line for an anticipated "Twilight" release. Another started a convoy of branded delivery cars downtown where a parade was happening.

"Afterwards, boom, immediately the phone started ringing," he said.

Smarter menus

Another expert suggestion Shepherd debunked is increasing prices throughout the year to keep up with the rising cost of food. Five or 10 years ago, this would have been a better option. Now, however, "it's a whole new world," he said.

"When people's incomes are going down, your prices can't keep going up," he said. "Increasing sales volume to outrun your rising costs is a race you can never win. You'll reach a point where you can't squeeze any more from your customers, and when the economy goes south again, it'll catch up to you. It's time to build a smarter menu, with more perceived value."

That means promoting what is cheap now, like sausage pizzas while pork prices are lower compared to beef prices. Build your menu backwards and make your prices — and items — incomparable to the competition's prices.

"When I add something to the menu, I think about what I can put on there that's only 17 or 20 percent of the food cost, and then build around it," Shepherd said. "I also try to put things on the menu that people can't compare to."

As an example, he pointed to Ace Hardware, which sells a different size of Roundup Weed and Grass Killer than Walmart, so people can't compare the two equally and Ace can gain a perceived value with its unique size. Also, unlike his in-town competitors, Shepherd's pizzerias don't sell breadsticks, they sell garlic knots and pepperoni rolls. Another example is differentiating the sizes of your pizzas — one shop may have 14-inch large pies, while the restaurant down the street has a 16-inch large.

Counterproductive forces

Shepherd closed his presentation pointing out the factors that are working against restaurant operators right now. This includes the big pizza chains that spent years trying to out-discount each other.

"The chains have killed us. It will take at least a decade before we can recover from deep discounted, $5 pizzas," he said. "The damage the chains have done to the perceived value of pizza is permanent. Some of your customers will never come back."

Other counterproductive forces, according to Shepherd, include the government and the modern-day workforce.

There is too much government in running a business, he says. "Every day I have to worry about state, unemployment, worker's comp, FICA, Medicare, school district, city, new regulations from the health department, etc.," he said.

Shepherd is also convinced the workforce no longer works its way up through the ranks like it used to.

"Much of the restaurant workforce is now made up of people who are trying to support their families. They're demanding higher wages and full benefits from day one," he said. "You're working yourself to death to generate taxes, pay interest, make your landlord richer, donate to charities, provide jobs, etc. It's time to just stop. That's not why you're here. You're in business to make money and to enjoy making it."

Read more about operations management.

Photo provided by illuminating9_11.


Topics: Food & Beverage , Marketing / Branding / Promotion , Operations Management , Staffing & Training , Sustainability , Systems / Technology , Trends / Statistics


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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