Focus on your operation, not the future

Feb. 19, 2002

Never has there been such a dearth of people willing to predict where the pizza business will go in 2002. If pizza people are anything, they're opinionated. But opining clearly is out of vogue at the moment -- perhaps because no one really has a clue about the immediate future.

That includes me, too. I'm not the only one hoping someone will shed some light on this present darkness. The most courageous prognostication I've heard to date was during a radio interview with an economics professor from the University of Kentucky. Asked when the recession will end, the professor said, "It will definitely end in 2002, but when, exactly, we don't know."

How's that for going out on a limb?

Back in October, Technomic researcher Tim Carlin envisioned good things for the pizza category in 2002, such as 3 to 5 percent growth. Like many, he was optimistic that Americans' financial hardships would lead them to pizza stores. Dozens of pizzeria operators I talked to even shared Carlin's rosy outlook; customers wouldn't stop eating out, they'd just reduce visits to more expensive spots and eat more pizza. Some even called pizza "recession proof."

By December, however, sharp drops in sales at Pizza Hut and Papa John's proved that pizza was far from recession proof. Both chains claimed reductions in advertising played a large role in those sales declines, but flat to below-average sales at other pizza companies proved that customers, well, just weren't buying as much pizza as we'd all hoped.

More than a Glimmer of Hope

Despite the somewhat grim mood of the moment, there are signs of encouragement, namely those operators actively looking for solutions rather than begging customers to come through the doors.

On one end of the spectrum is Pizza Hut parent Tricon, which announced last month that it will open more of its multi-branded outlets -- which include KFC and Taco Bell -- in 2002. (Take note, operators who don't own multiple brands: seeking co-branding partnerships of your own could be profitable.) Tricon also is ramping up international growth, as is Domino's Pizza.

Another bright spot is the stock market. Despite lackluster performance throughout most of 2001, pizza stocks finished the year on a strong upswing. Share prices of Papa John's, California Pizza Kitchen, Tricon, and CEC (parent company of Chuck E. Cheese) rose 25 to 35 percent over last year. Perhaps stock analysts and investors believe as Technomic does, that pizza will improve throughout the year.

(Later this month, when public pizza players have turned in their 2001 numbers and 2002 projections, Tony Howard, an analyst specializing in foodservice industry stocks, will write an opinion for Return to this spot to see what he has to say.)

On the other end of the spectrum are operators who've been driven to creativity, guys like Peter Picurro, owner of Picurro Pizzeria in Tucson, Ariz. To reduce demand on delivery, Picurro sells logoed hot bags for $3.95 each, and gives an 11-percent price break to customers who use carryout.

Freddie Wehbe, a five-store Domino's franchisee in Gainesville, Fla., gained national attention with ads he placed in a student newspaper at the University of Florida. In the ad, Gator fans got a large one-topping for $6.95. Fans of Gators opponents, however, paid $29.95 (Florida State) and $39.95 (Tennessee) for the same pie. Wehbe's ads were shown on ESPN's GameDay football pre-game show, and mentioned on two Gainesville sports talk radio shows.

A little fun note: The phone number for Wehbe's busiest store, located near the Florida campus, is 373-2337, which spells "FRE BEER." Do you think thirsty college students have a hard time remembering that one? It's no surprise that this store is the highest-volume unit in the Domino's chain.

The Money's Out There

Don't forget this one truth: The money that used to be spent on your pizzas is still out there. It's just that customers are holding on to it more tightly or spending it elsewhere.

For example, since the terrorist attacks, betting on horse races and gambling at riverboat casinos is up in Kentucky, Indiana and Illinois. And of the handful of cities that bounced back from tourism declines, Las Vegas was among the quickest.

No, that doesn't make sense to me either, given that most people turn conservative in a recession. But it's clearly making cents -- and dollars -- at the craps table.

For Whatever it's Worth: My Advice

Since I'm a regular pizza customer, perhaps the only help I can offer is to tell you what hooks me to buy: I buy the best pie in town. The store I go to is well out of my way, but no other pizza than this one will do when my family is craving it. The ingredients are top quality, the overall product is exceptional, and the barely-higher-than-usual price is worth it -- and would be worth more if I had to pay it. Not only do I go there enough to know the owner by name, I regularly see the same customers.

It's no surprise that the owner is looking to grow to his third store, which -- thank you, God -- will be much closer to my home. But even if he moved further away, I'd make the time to travel there, too.

I don't need price discounts or witty commercials to keep me coming, I simply need a product I can count on week after week. Don't make it merely good tasting, because the pizza I make at home achieves that mark. Just make it taste great, or I'm not coming back -- not even for a free soda or a two-for-one deal.

Pretty simple strategy, huh?

A lot simpler than predicting the future.

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