Green with envy

June 15, 2005

If your company is an independent or a small chain, news of Pizza Hut's continued same-store sales gains this year may have you down.

But take heart, small fries. Over the past couple years, you've gained not only on the industry leader, but on its nearest competitors, too.

According to a recent report by Technomic Inc., a restaurant industry research firm based in Chicago, small chains and independents increased their overall pizza market share by 2 percent collectively. That gain led Citigroup Smith-Barney restaurant stock analyst Mark Kalinowski to write in a recent investor newsletter, "Small chains and independents are gaining meaningful ground in few other segments in the restaurant industry." And when you understand that smaller pizza companies lost market share in 2002, that highlights, he added, just how "competitive the pizza sector can be."

But that's about where the good news stops. Technomic's researchers believe that, as a whole, the pizza industry will lose 1 percent of the total foodservice industry market share to other restaurant segments over the next five years. Some of this growth, in Kalinowski's opinion, will come from other concepts' ability to sell premium items such as salads.

If you haven't been watching other restaurant sectors, take note: Salads are hot, especially at McDonald's. The lean, green offerings are putting wads of green in Ronald's registers and leaving competitors green with envy.

You might want to do salads, too, if you aren't already, especially if the rumblings about the low-carb trend waning are real. Now that people appear to be backing off the "unbalanced diet" binge, it appears veggies — particularly in the form of salads — are getting more attention.

Pizza Hut already delivers bagged salads — smart, smart move — as do Domino's Pizza units on the West Coast. Lots of independents and small chains are doing them, too, but I hear mixed results about their sales. To me that begs several questions:

1. Are your salads any good?

I've had both ethereal and abysmal salad experiences at two hamburger chains lately. The product was either really fresh, or really old and full of lettuce cores and other undesirable "fixings."

There's no reason for this, because assembling a salad to order is no more difficult than preparing a pizza or a hamburger (if all the ingredients are prepped ahead of time). Yet I see them prepackaged in most quick-service restaurants.

If you believe having salads packaged and visible to customers generates impulse purchases, then put a few out for show and then surprise the customer by saying, "Let me make a fresh one for you." You'll make a memorable quality statement.

2. Are you marketing them effectively?

Not only is McDonald's advertising its salads, the detail devoted to their packaging and positioning is slick, eye-catching and relevant. Its Go Active meals include a salad, dressing, a pedometer and a walking tip booklet from fitness guru Bob Greene.

Such treatment is likely too expensive for most pizza shops, but everyone should at least consider how they might, well, borrow some of those components.

3. Are they priced right?

The price range for premium salads at quick-service sandwich joints is $3.99 to $5.99. Any person paying those prices expects a meal-size salad, not a side salad.

If pizza operators were to consider serving such large salads, that could shift some customer purchases from pizza to salads, and every operator has to consider whether that's a good idea.

You also could position your salads as dinnertime add-ons — as Pizza Hut does — and generate incremental sales.

I think you can have it both ways: Emphasize meal-size salad sales at lunch, when pizza sales aren't that strong anyway, and push side salads at night, when pizza sales dominate.

Topics: Commentary , Independent Operation , Pizza Hut

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