Pizza Hut introduced an innovative reward and recognition program throughout their company. President Mike Rawlings presents “Big Cheese Awards” to company and franchise team members for outstanding efforts and the program has become very popular.
The final strategy is culminating everything the company has done to transform the business over the past two and a half years, and to update and contemporize Pizza Hut restaurants. The company is investing over $500 million to contemporize company-owned stores. In addition, Pizza Hut franchisees will make a significant investment to refurbish their restaurants during the same period.
Pizza Hut’s refranchising program is expected to continue this year, tapping the momentum of the 115 former corporate-owned units that were spun off to franchisees during the first quarter of 1999. The sales are part of Tricon’s multi-year-long strategy to reduce the company’s ownership to approximately 25 percent of the Pizza Hut system.
DOMINO’S pizza history and profile
Thomas Monaghan began his pizza career in 1960 when he purchased a failed pizza business in Michigan by the name of DomiNick’s. He borrowed $500 for the purchase and he and his brother James began making pizzas. By 1961 his brother James gave up on the business, and traded his share in DomiNick’s for a Volkswagen Beetle.
Thomas kept experimenting with pizzas through trial and error. He developed the strategy of selling only pizza and locating stores near colleges and military bases.
In 1965, he changed the company name from DomiNick’s to Domino’s Pizza. During the next 10 years, there were many setbacks that nearly lead the company into bankruptcy.
In the early 1980’s, Domino’s grew dramatically. The company had more than doubled its’ U.S. stores to 1,000 and had become an international company by opening its first store in Canada in 1983. The company was becoming very successful, and this success brought much wealth to the owner; however, Thomas did not possess the ability or skill of managing funds properly, or appropriately creating intense problems.
In 1989, Thomas decided to sell Domino’s. He put the company up for sale, but no one was interested in purchasing the company. Thomas replaced himself with a new management group in hopes of restoring the finances of the company. In 1991, the company performance began to slide and Thomas returned to management. He began selling his personal assets and used the money to renew the company.
Domino’s is based in Ann Arbor, Michigan and is the leading pizza delivery company in the United States. They operate through a worldwide network of over 6,219 franchise and corporate owned stores. Approximately 90% of the stores are franchises.
Amid all the changes, Domino’s Pizza reported double-digit increases in earnings for 1998. The company says same-store sales growth was driven last year by the success of the “heat wave” marketing campaign, which touted Domino’s new delivery bag technology aimed at keeping pizza hotter.
Over the thirty-eight (38) years since their founding, they have developed a simple, cost-efficient model. Domino’s reputation was built on speedy delivery of pizza, but is now emphasizing a focused menu of high quality and value-priced pizza with three types of crust.
In late 1998, Domino’s Pizza initiated a cost-reduction program to improve corporate profitability. The effort, which was completed by year-end, resulted in the sale or closure of 142 company stores and the elimination of certain regional offices.
Domino’s business strategy has been to grow revenues and profitability by focusing on prompt delivery of high quality product, operational excellence and brand recognition through strong promotional advertising. Their strategy has resulted in a leading market position and a track record of profitable growth. They intend to achieve further growth and strengthen their competitive position through their continued implementation of their strategy and focused initiatives.
As for the future of Domino’s, the newly appointed Chairman, President and CEO, David Brandon says one of his priorities is to propel store growth through franchising expansion.
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Their strategy for further growth and, efforts to strengthen their competitive position, has resulted in revenues increasing by 21.3%, operating expenses increasing 21.1% and net income resulting in a significant increase of 290.3%. Graph 4 indicates the financial results of their business strategy for the fiscal years ending December 29 as evidence of their concerted efforts.
LITTLE CAESARS PIZZA HISTORY AND PROFILE
In 1959 Michael and Marian Ilitch sank $10,000 of their savings into their first pizza operation in Garden City, Michigan. Marion suggested that the name reflect Michael’s behaviour (like a little Caesar). They opened a second location in 1961, and the next year they sold their first franchise. Little Caesar grew to more than 50 outlets during the 1960s. In 1974 the company initiated its two-for-one marketing concept. Little Caesar installed drive through windows at its quick-serve locations and a pizza conveyor oven that increased pizza production in 1997. In 1985 the company formed Little Caesars Love Kitchen. This not-for-profit restaurant on wheels delivers pizzas donated by local franchise owners to soup kitchens and shelters in the US and Canada.
Little Caesars began providing delivery from many of its stores in 1995, but when the service increased their costs, many franchisees dropped deliveries, however, some continue to deliver. In 1996 the company opened the first of 50 planned Little Caesar units in Wal-Mart stores and added such items as turkey, stuffing, and mashed potatoes to the menu. Little Caesars pizza can be ordered at Kmart.
Net income plunged from $14.5 million in 1996 to $2.5 million in 1997. Sales have lagged for Little Caesars the last few years as their chief competitors, Papa Johns and Domino’s, increased their market share. Little Caesars, ranked behind Pizza Hut and Domino’s, generated $1.37 billion in system-wide sales for fiscal year ending in December 1997, a decrease of 1.79 percent from the previous year. Industry analysts say that most of the growth is now coming from international markets
Historically Little Caesars has been the “value player” in the pizza category. The company has been known for its two-for-one deals. Little Caesars niche is a low-cost pizza that appeals to families on a budget.
In 1998, amid declining sales and franchisee complaints, Little Caesar brought in a new advertising agency and implemented a plan to emphasize quality and products’ ingredients. It has also announced a makeover plan for its stores. In July 1999 Little Caesar Enterprises, Inc. closed between 300 and 400 company-owned stores in several markets in an effort to revitalize the whole system. In July 1999, Little Caesar also detailed a program to increase the marketing activities of local co-ops in the system by reducing franchisees’ payments of advertising fees from 4 percent to 2 percent and curtailing national promotions.
Little Caesar made its mark on the pizza world through its bold and wacky advertising, most notably for the “Pizza! Pizza!” deal, which offers two pies for the price of one. Headquartered in Detroit, Little Caesar Enterprises’ boasts roughly 4,500 restaurants (25 percent are company-owned) in a dozen countries, ranking in at #3 in size behind #1 Pizza Hut, and #2 ranked Domino’s. The company is also facing new competition for up-and-comer Papa John’s, the #4 US pizza chain.
Rather than emphasizing speedy delivery, Little Caesar’s focuses on carryout and touts the quality of its pizza, Grade A cheese, specially grown California tomatoes and high-gluten flour. They have lower overhead and maintenance costs than sit-down or delivery-only outlets, since they do not require waiters, busboys, dishwashers or delivery personnel.
Restaurant analysts and industry observers concluded that Little Caesar’s was the only national pizza chain, among the segment’s four most powerful players, that did not prosper. Although privately held Little Caesar’s has not been forthcoming with sales results, this chain has been plagued in recent years with declining volumes and franchised-store closures reportedly. Little Caesars’ inconsistent marketing strategies and high equipment costs have caused their years of declining sales.
Graph 5 indicates a nine-year growth pattern for Sales and is stated in millions of dollars. The growth rate for this period was 28.4%. Little Caesars increased the number of their stores of 500 in 1984 to a total of 4,609 in 1993 indicating a nine-year growth rate of 28.0%. Employees of 12,900 in 1984 have increased to 92,000 in 1993 for a growth rate of 24.4%.
Little Caesars fiscal year ends in December of each year and their revenues are expressed in millions of dollars and indicate the slight decrease in revenues with further explanation following.
However, while their revenues and number of stores had increased at a growth rate of approximately 28% through 1993; the company was faced with stiffer competition within the pizza chain sector. Little Caesar’s has been struggling with the efficiency of their operation for the years of 1996 through 1998. While there has been an 8.53% increase in the number of U. S. units, a slight decline in revenues of .003% and, a decline in sales per unit of 11.3% for the last three years, indicate this company must re-focus their strategy and concentrate on their survival in the industry.
PAPA JOHN’S international, inc. HISTORY AND PROFILE
John H. Schnatter had a vision and in 1983, said “Talking about my dreams for a pizza business at age 22, people thought I was crazy. Vendors, bankers and even some friends just laughed when I told them I’d be opening five or six store’s a month”. John wanted to create the perfect pizza, made from the best ingredients, delivered hot and fresh to the customer’s door.
With less than $1,600 in capital, but equipped with 100% determination, Schnatter installed an oven in a converted broom closet in the back of an Indiana tavern and began delivering pizza.
In the company’s first year, he sold 300-400 pizzas a week. One year later he opened the first Papa John’s restaurant. At September 26, 1999 there were 2,159 Papa John’s restaurants (548 company-owned. 1,589 domestic franchised and 22 international franchised) operating in 47 states, the District of Columbia and five international countries.
John Schnatter’s recipe for success is simple, concentrate on what you do well, and do it better than anybody else. To maintain the integrity of that fundamental principle, Papa John’s menu is limited to just a few core products, namely pizza, breadsticks, cheesesticks and soft drinks, available for delivery or carryout.
Papa John’s unwavering focus on a limited menu of high-quality products, streamlined operations, their distribution system and training and development programs have resulted in an increasing respect from customers, franchisees, investors and employees alike.
Papa John’s, the fourth-largest and fastest-growing pizza chain in the segment, exceeded $1 billion in system wide sales for the first time in 1998, while the chain’s same-store sales increased nearly 10 percent. Last year this chain added 372 new restaurants to the system, including its first international units in Mexico. This year, Papa John’s is continuing international expansion, while increasing its presence in such Western states as California and Arizona.
Papa John’s is expecting their sales to exceed $ 1.4 billion in 1999, and is looking to surpass Little Caesars this year in terms of system-wide volumes, which is an achievable goal.
Selected financial data for the nine-month period ending September 26, 1999, as compared to same period ending September 27, 1998, has been highlighted in Table 5 for Balance Sheet accounts and Chart 6 highlights Revenues, Selected Expenses and Net Income on the following page.
Expressed in Thousands of $$ – TABLE 5
9 MONTHS
ENDED
9/26/99
9 MONTHS
ENDED
9/27/98 % OF
INCREASE/
(DECREASE)
BALANCE SHEET
Current Assets $ 79,474 $ 68,023 16.8%
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