Sept. 27, 2010
Earlier this year, Uno Chicago Grill, the original deep dish pizza chain, filed for bankruptcy. Executive leadership was understandably tight-lipped about the situation, especially after a 2009 fall that saw many menu LTOs, electronic gift card offerings, and expansion of its QSR and fast casual brands, Uno Express and Uno Due Go.
Now Uno SVP marketing Rick Hendrie breaks the silence about the brand’s emergence from Chapter 11. He calls the brand’s positioning “stronger than ever,” having fixed the primary problem of the balance sheet. He also discusses the reasoning behind recent menu revamps and delves into the intriguing new limited-service models.
Let’s talk about the recent menu overhaul, with its options flexibility and emphasis on Mediterranean and other ethnic touches. What directed that?
I wouldn’t say that we had made it Mediterranean in any conscious way. It’s been consistent with our menu philosophy. In all cases, we focus on flavor. So no matter what you order, whether indulgent or a mindful, healthier choice – first and foremost you must be bowled over by the flavor. That’s our litmus test.
In every section of the menu, we offer these choices of pasta, salad, pizzas. There’s always a variety of choices that are more mindful. It could be about calories, fiber -- like our five-seed thin crust pizza with flax seed, which has all sorts of unbelievably healthy grains.
We're going to continue to develop higher-flavor profile pizzas, but thin crust is a real opportunity for us. No matter what we may do, the deep dish remains and always will. But with thin crust, we continue to look at more interesting toppings. Our crusts are critical. In our case, for deep dish, people love the crust as much as anything else – they describe it as “out of this world,” “to die for,” “unbelievably buttery” – colorful descriptions of how they feel about the crust. So we spend a lot of time making sure these crusts (stand out).
Can you describe the strategy for your fast casual concept, Uno Due Go, and the QSR version, Uno Express? How have these performed recently? Where will you be scaling up their locations, and how quickly?
Uno Due Go is a concept we had the chance to create from scratch. Uno is a venerable brand created in 1943, which is a pretty amazing record for any casual restaurant. But Due Go came out of our own imaginations, and it’s completely consistent with Frank’s (Guidara, president and CEO) vision of a concept devoted to unbelievable flavor, and a real focus more than ever on nutrition. There are about four of them: The two originals in the Dallas/Fort Worth airport, and two more opened in the student center at Cleveland State and at a new student center at University of Wisconsin - Whitewater. All four continue to perform with real strength. I can’t give specific numbers, but we’re very pleased with how guests are experiencing the concept. It does have a bar (no table service) in several venues. There is that component, or potential, for Uno Due Go. The fact that it has pizza makes it a unique player in fast casual (a very small percentage of the segment).
Uno Express is quick-service Uno, primarily serving slices. It’s all about fast and hot – fast, hot and tasty are the three watch words for us there. … We operate this fast Uno in club stores, warehouse stores like BJ’s, airports, places where it’s truly grab ‘n’ go. It’s not exclusively slices, but that’s the kind of thing people want to be able to grab with a drink (at these places).
What sorts of locations will the two concepts target in the future?
Uno Due Go will likely have a mixed portfolio as it grows: airports, universities, but also classic retail locations. I think that’s part of our growth plan, and we’re looking to be aggressive, looking for franchisees, and to expand it on our own as well.
Uno Express is an interesting venue for an operator because it’s not a franchise – it’s licensed, so those costs (aren’t as high as franchising). There’s a potentially extremely low price of entry for an operator. Depending on venue there’s a scale, a variety of levels of cost; without exception, it is a remarkably effective option for operators, particularly in non-traditional venues. Also, we provide a lot of design, so you have the impact and wisdom of a full-service restaurant company behind it, which is another feature of that brand. Fast food hasn’t necessarily come from that place. And the food comes from our plant, so the operator doesn’t require a sophisticated labor pool. The quality is managed before it gets (to the location). You’ve cut out a lot of the areas where quality can degrade. So it’s an extremely effective option, and very attractive.
Uno Due Go is looking at franchisees. Uno Express does not require that, so people can say, “Hey, how can I get in on this.” And Uno Express makes sense for someone who has multiple locations, because you can get the impact quickly. I think we’re looking for a larger player there.
I’ve read about new packaged foods rollouts: frozen entrees and mini calzones. Where are these distributed? Are they branded with the “Uno” name, or do you also do private label?
Our consumer package group – Uno Foods – is Uno-branded, and there is a foodservice component of it with some unbranded pizzas. But essentially, Uno Foods is about providing Uno-branded products in distributing channels appropriate to consumer-packaged goods – supermarkets, club stores, etc. We’re also expanding beyond our classic pizza focus, so you now have entrees appearing in the frozen food shelves, like the Tastefulls, our competitor of Hot Pockets, in a variety of flavors. We consistently outperform (Hot Pockets) in taste tests.
We have distribution capabilities across the nation in Stop & Shop and Kroger, etc. There’s a test of the Tastefulls line in 800 stores; and a lot of supermarket chains that are working with us, no geographic restriction.
Were there any corporate lessons to be learned from the recent bankruptcy, or do you all chalk it up to just finances, investments and the economy?
I think it’s important for anyone who is interested to really understand the situation.
When the company originally was purchased by former owner Centro Partners in late 2004/early 2005, the casual dining world was fine. I think the prospects for Uno were seen as being excellent. The requirements for the purchase included some bonds coming due, etc. And at that point, five, six, seven, years down the line – it was aggressive, but given the state of the economy of the world, seemed eminently doable.
Then in 2006, a number of key casual dining concepts began to slow. We were still going in the opposite direction, having seen seven quarters of positive same-store sales. Then we got hit by the tsunami at the end of 2007. Then, 2008 was a dramatic year. And in our case, the problem we had was a balance sheet problem.
Then the bondholders, banks, (and executives) came up with a strategy, which included the restructuring. So the filing was a component of a strategy to fix the balance sheet, and as a result, bondholders became stockholders. That came out of the end of July, after about six months, which is extremely rapid – most times you’ll find many filings are messy and can take years. In our case it was well planned and well executed, and we got out at the earliest possible moment. Now we’ve got a healthy balance of two times the ratio of debt to equity. It had been substantially worse. Now we have the opportunity to take advantage of all the stuff on the table: cash to invest; owners who are genuinely interested in Uno.