Want success? Systematize your pizza business

July 16, 2005

I love history, so when I get to dig into pizza history, hobby and career cross paths and life gets fun.

One "historian" I spoke to recently is Don Boroian, 70, founder and chief executive of Francorp, a consulting firm to franchised businesses and companies seeking to franchise. Boroian has watched the franchise business for nearly four decades, and what he's learned along the way he now preaches passionately to business owners and at industry gatherings.

Interestingly, little of what he says is earth-shattering, but any business owner — franchisee or independent — can benefit from hearing "the gospel according to Don." The message is simple: If you want to build a business you can grow, create a foolproof system which allows for duplication by others.

"It is all

Steve Coomes, Senior Editor

about the system," Boroian said. "It is the most important thing."

Even if you never grow your business beyond one unit, he said, you still need a system, that ...

* takes care of the business while the owner is away

* simplifies training of new staff

* makes crystal clear all recipes, policies and procedures

* minimizes the need for ad hoc management

* and is stable enough to endure adjustments as the market warrants.

Your concept doesn't even have to be the greatest, Boroian said, but if your system allows you to "execute it well and consistently, you could be successful.

"But even if you have the best food in the world, if you don't know how to run the business, and you don't have a good business system, you won't succeed."

Several times in our conversation, Boroian singled out McDonald's as the poster child for restaurant systems. No, McDonald's food isn't that great, he said, but its

Don Boroian, CEO, Francorp

system for delivering it is unparalleled. And the good news is operators with solid systems can improve products and services much easier because the basic operation takes care of itself. Like a steamship pushing through the seas, a systematized business has enough momentum to maintain both speed and heading despite small changes in course. That the crew is fixing the pool, the chef is changing the menu and the sides are being painted don't affect the ship's ability to arrive at its destination. They merely enhance the experience.

Proof of McDonald's ability to do that was evident in its spectacular salad rollout and breakfast menu upgrade in 2003. And despite the deaths of two influential CEOs in one year, its sales and stock price continue to soar well into 2005.

Unending evolution

Boroian is fascinated by the food industry's never-ending evolution: Older and well-established players dominate their market segments, and then along comes a new company with a slightly different twist. That gets consumers' attention and the newcomer starts chewing away at the dominant players' market share.

"When Wendy's first came out, everybody said, 'Who needs another burger? We have Burger King and McDonald's,'" Boroian said. Then he pointed to Papa John's taking on Pizza Hut, Domino's Pizza and Little Caesar's in a day when that trio seemingly had the market sewn up.

"There is always room at the trough for someone who is good, tough enough, resilient, smart enough to figure out the niche where they belong in the market place," he said. "Did we really need a Wal-Mart? We already had K-Mart, Sears, Target and all of the other discount chains. ... Now all of a sudden (Wal-Mart is) dominant and K-Mart is bankrupt."

Boroian said such giant killers' concepts are rarely different than their competitors'. What allows them to succeed is finding unfilled niches. Wendy's and Papa John's saw room in their respective segments to position their products as premium offerings. Papa John's claimed it served "Better Pizza. Better Ingredients." Wendy's positioned its burgers next to its competitors' and asked, "Where's the beef?"

Papa Murphy's Take 'N' Bake Pizza proves the pizza industry is evolving, Boroian said. People want pizza to be hot when they get it, and if they have to bake it themselves to ensure that, many don't mind, he said.

"Even I can follow the directions, so you know it's easy," he said. The chain, he added, is "going to be a serious contender."

A regional pizza player he's watching is Aurelio's Pizza, based in Chicago. Though decades old, the

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founder's children are running the business and Boroian believes they can grow it. "They have about 40 to 50 units, a fabulous product, and they are starting to roll out now. I think they could be a very strong national player."

Growing systematically

Even if you have just one unit, you still should apply Boroian's principles of systemization to your business.

You can bet that La Nova Pizza, which took more than 40 years to add a second unit, is systematized to the teeth. Its original pizzeria grosses more than $5 million a year in sales, and the second pulls in more than $3 million. The Todaro family didn't become that successful by chance.

Systems behind great pizza operations have at least these elements:

* strict portion control measures

* tightly managed ordering and inventory procedures

* easy-to-follow recipes

* copies of written policies and procedures for every employee

The first three items have a profound effect on profits (via food cost) and product consistency. The last, an employee manual, is tedious to produce, but necessary. Every employee must have one. Test them on its contents regularly to ensure they know the system.

Before you add a new unit, take some expert advice. Donatos founder Jim Grote learned the hard way that opening a new unit by raiding the old unit's crew always helps one at the expense of another — unless plenty of experienced staff is left behind.

Domino's founder Tom Monaghan said much the same (read more ... Monaghan's maxim was never to put the cart before the horse). Before adding units, Monaghan said your first store should be generating consistent double-digit sales and profit increases and its crew must be highly skilled at handling the rush. And even at that point, Monaghan believes the operator should wait one more year before opening the new store in order to deepen his crew strength. In other words, the crew that moved to the new store had to be as strong as the crew left behind.

Sounds like the backbone of a system to me.

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