Gourmet is the way for take and bake, says Nick-N-Willy's CEO

April 29, 2003

When it comes to empire building, Scott Adams prefers starting from the ground floor.

Eleven years ago, Quiznos Sub hired Adams to help grow what was then an 18-store sandwich chain. Nine years later, when he was its senior vice president of global development, Quizno's had 2,000 stores operating in eight countries.

In 2001, Adams left the sub chain to buy Nick-N-Willy's World Famous Take-N-Bake Pizza, a 17-store company then based in Boulder, Colo. In reality, the product was famous only in the Rocky Mountain state, but Adams and partner Dick Weil, a former executive at Multifoods Distribution (now called Vistar), believed it could gain authentic renown under their leadership.

In less than two years, the pair has doubled Nick-N-Willy's numbers to 35 locations in 11 U.S. states. Adams expects store numbers to double again by the end of 2003, and in seven years, he believes there could be 1,100 Nick-N-Willy's in North America.

"We just sold the development agreement for 320 stores in Canada," Adams said during a March interview. "We think the concept will do very well there."

Adams admits producing such numbers in the world's most competitive pizza market will be no small feat.

Scott Adams, CEO, Nick-N-Willy's

But in his opinion, Nick-N-Willy's is no regular pizza company.

As a gourmet take-and-bake pizza chain, which also sells slices, salads and desserts to dine-in customers, it is, at the very least, unique.

Despite the growth of Vancouver, Wash.-based Papa Murphy's Take 'N' Bake Pizza, the take-and-bake segment leader, with about 750 stores, Adams believes expansion opportunies abound.

"The original take-and-bake pizza is the frozen pizza at the grocery, and the information we've seen says that's a $3 billion market," said Adams, Nick-N-Willy's CEO. "So if you look at numbers for Papa Murphy's, which is a ($380 million) business, that's only 10 percent of the grocery take-and-bake business. To me, that means there's a lot of room to grow."

Recalling how Quiznos penetrated the sub sandwich market -- which was and still is dominated by Subway -- Adams expects his company can do the same with its upscale products. Quiznos differentiated itself from Subway by serving top-quality meats, cheese and breads and serving its sandwiches hot. ("And look at what Subway's done since," Adams added. "It has a line of new breads and sauces, they're serving hot sandwiches ... they reacted properly to a changing market.")

Similarly, by serving gourmet toppings customers won't find at Papa Murphy's, Adams said Nick-N-Willy's pizzas will create their own niche.

"In those markets where there are Papa Murphy's, our customers look at ours as a step up," Adams said. Comparing his pizza company's growth pace to Quiznos', he added, "We're quite a ways ahead of the curve of what we did there, and they're a 2,000 store chain now."

Customers frequenting the store of Nick-N-Willy's franchisee Jerry Turbett, in Scottsdale, Ariz., are exactly the "very upscale, professional crowd" Nick-N-Willy's wants to attract. Turbett said those customers appreciate toppings other than the old standards, though a few guests require some prodding.

"I tell them, 'Why would you want a pepperoni pizza when you can have this?' " Turbett said, referring to a gourmet slice special he serves at lunch. "Once they try it, though, the loyalty is beyond belief."

Jodi Aufdencamp, co-owner of three-store Mama Mimi's Take 'N Bake Pizza in Columbus, Ohio, believes Nick-N-Willy's gourmet positioning will pay off. Even though she and husband Jeff avoided calling their pizzas "gourmet," when they started their company three years ago, customer desire for high-end toppings convinced them that was the way to go.

Nick-N-Willy's Aegean Pizza

"We didn't want to intimidate people who wanted the traditional pepperoni pizza," said Aufdencamp. "But the gourmet part of our menu marketed itself by word of mouth. Our growth has come from our gourmet pizzas."

Dennis Lombardi, executive vice president at Technomic, Inc., a Chicago-based foodservice consulting firm, said upscale pizzas will cause take-and-bake to stand out among its pizza peers.

"All the demographics say gourmet take and bake is where it's at," Lombardi said. "High-quality products like those -- and they're going to have to be high-quality in order to survive -- offer a nice alternative to lower-cost pizzas that are out there."

Increasing sales of exotic pizzas at California Pizza Kitchen and Wolfgang Puck Café, Lombardi said, indicate customers want uniquely flavored pies. Add that to the convenience of take and bake, and a concept like Nick-N-Willy's, should do well, he said.

Raw or ready?

While all Nick-N-Willy's stores sell hot slices (typically at lunch and with salad and soft drink combo deals), none cooks whole pies. (The chain uses countertop impinger ovens to heat the slices.) Customers do ask for cooked pizzas to go, Adams said, but company product standards don't allow it.

"We believe our consumer should be able to taste our product at its peak flavor level," Adams said. "And to do that, you either take it home and bake it yourself, or you eat it in the store by the slice."

Turbett said that getting customers to understand he doesn't sell whole cooked pies takes some training and patience.

"People come in the store and want to order a pizza to take with them, but you tell them nicely, 'This is take and bake, and you're going to take it home and bake it,' " he said. "When you hand it to them uncooked, they get this look on their face that tells you they absolutely didn't hear what you told them."

The next step, Turbett said, is to sell such customers a slice, "introduce them to the product," and explain again how to enjoy the product at home.

Such effort to sell slices is something Aufdencamp avoids. "We'll never get into that; we'll never do both. If we ever cook it, it won't be under the Mama Mimi's name."

Turbett, however, credits slice sales with helping build his business.

At a Glance

Principals: Scott Adams and Dick Weil (since May 31, 2001)

HQ: Lone Tree, Colo.

Founded: 1988, in Boulder, Colo.

Founders: Keith McQuillen and Terry Jones

Concept: Gourmet take-and-bake pizza

Store numbers: 35

Cost to start: $190,000

Royalties: 6 percent of sales

Average annual store sales: $350,000

Per person check average: $7

Average personnel per store required: 10

To generate trial, he has staffers hand out free slices occasionally to people driving by his store.

"We sell 120 to 150 slices a day, but we couldn't survive on them alone," Turbett said. "But they are really helping us build our take-and-bake business."

Knowledge is power

Two keys to Nick-N-Willy's future success, Adams said, are its ability to communicate quickly with franchisees through its NickNet system, and its strong distribution network.

The company's Web-based NickNet intranet provides franchisees access to every Nick-N-Willy's operations manual, updated and easily customizable advertising materials, as well as a communication channel between other franchisees and the corporate staff. A prime advantage of networking through NickNet, Adams said, is the quick and efficient exchange of best practices between operators.

Additionally, anything Adams or Weil (the company's president and COO) sends to franchisees is tracked for receipt and response by NickNet.

"That way, if we were to roll out a new product by a certain date ... and we'd sent notice through NickNet, it would tell us who responded to the message and who hadn't," Adams said. "It gives everyone complete accountability by eliminating the possibility someone would say they didn't receive (the notice) in the mail or hadn't opened it yet."

According to Adams, Weil's history with Multifoods and his carryover connections to Vistar allow Nick-N-Willy's operators to enjoy distribution advantages rarely available to such a small company. Their ability to receive near-national pricing and availability on core items is crucial to unit profitability, Adams said.

"It's not like you're a small company, and then you wake up one day and have 50 stores," Adams said. "But if you're going to grow across the United States like we are, you have to have a logical distribution system in which one store in a market by itself can run a food cost nearly identical to a market where we have 30 stores."

To achieve this, Adams said Weil, who was unavailable for comment, negotiated with Vistar to have available at all times, 30 key items every Nick-N-Willy's store needs in stock, no matter where the store is in the U.S.

"We could go into a market, put out a good product, but fail in that operation because food cost was five points too high ... because we didn't strategically think to put those goods into that market," Adams added. "Most restaurant entrepreneurs have no experience in distribution, and then they wind up doing this as an afterthought. So having a nuts-and-bolts guy like Dick, who knows how to do this, is crucial."

Topics: Financial Management , Operations Management

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