A PIZZA ON THE AC­TION

Inside Franchise Business - - Contents - By Do­mini Stu­art

What it takes to keep a pizza brand grow­ing and evolv­ing.

Just a decade ago, nine out of 10 pizza or­ders were for tra­di­tional favourites such as Pep­per­oni, Supreme or Hawai­ian. To­day, many con­sumers are opt­ing for a more gourmet pizza ex­pe­ri­ence de­spite the rel­a­tively high cost.

No mat­ter which way you slice it, the pizza in­dus­try keeps grow­ing and evolv­ing, but be­ing among the top

play­ers in­volves both in­no­va­tion and tech­nol­ogy.

“Both food-re­lated tele­vi­sion pro­grams such as Mas­ter Chef and ris­ing dis­pos­able in­comes have sup­ported growth in the gourmet pizza seg­ment,” says Ibis World se­nior in­dus­try an­a­lyst Bao Vuong. “The suc­cess of Crust Gourmet Pizza Bar over the past five years sug­gests there is still scope for growth, but with in­creas­ing com­pe­ti­tion, brands may need to of­fer higher-qual­ity prod­ucts at lower prices to stay ahead of the curve.”

It seems that lead­ing brands have also noted the trend.

“Af­ter a pe­riod of ex­ten­sive dis­count­ing, we’ve started to see more pre­mium ranges with higher-qual­ity in­gre­di­ents and, there­fore, higher price tags,” says Euromon­i­tor In­ter­na­tional se­nior re­search an­a­lyst Bet­tina Kurnik. “For ex­am­ple, the Domino’s re­vamped Pre­mium range re­tails at a rec­om­mended price of $15.90 a pizza com­pared with $12.95 for its pre­vi­ous Chef’s Best of­fer­ing.”

When Ea­gle Boys Pizza failed to re­spond to changes in the mar­ket, it paid a high price. In July last year the head of­fice and all com­pany-owned out­lets were placed in vol­un­tary ad­min­is­tra­tion. How­ever, sev­eral fran­chisees con­tin­ued to trade un­til they were ac­quired, and re­branded, by Pizza Hut in a bid to solve prob­lems of its own. Ac­cord­ing to Roy Mor­gan re­search, the chain was hit by a 25 per cent de­cline in mar­ket share be­tween 2012 and 2016.

“Ac­quir­ing Ea­gle Boys has en­abled Pizza Hut to ex­pand its store net­work and brand pres­ence,” says Vuong. “It can also take ad­van­tage of economies of scale to boost prof­itabil­ity and rev­enue.”

He also be­lieves that if Pizza Hut is to stay com­pet­i­tive, it must up­grade its equip­ment, boost its ad­ver­tis­ing and learn from the Ea­gle Boys de­ba­cle by keep­ing pace with chang­ing con­sumer pref­er­ences. “It also needs to im­prove res­tau­rant tech­nol­ogy and fo­cus on dig­i­tal ini­tia­tives, like Domino’s or­der­ing ap­pli­ca­tions.”

TECH­NOL­OGY PIONEER

Domino’s is widely re­garded as a pioneer in us­ing tech­nol­ogy to en­gage with cus­tomers, cus­tomise its of­fer­ings and en­sure faster de­liv­ery.

“It in­tro­duced zero-click or­der­ing last year, launched a dig­i­tal gift card and – in a world first – used a drone to de­liver a pizza in New Zealand,” says Kurnik. “Now the com­pany is ex­per­i­ment­ing with pre­par­ing, cook­ing and de­liv­er­ing a pizza within 10 min­utes.”

She an­tic­i­pates that Domino’s and other ma­jor play­ers will con­tinue to aim for higher spend per trans­ac­tion by ex­tend­ing their menus. “One ex­am­ple was Domino’s Taste the Colour ini­tia­tive, which in­cluded a range of new piz­zas, sides and desserts to en­cour­age con­sumers to add to their or­ders.

“The strat­egy ap­pears to be work­ing. Last year we recorded a 5 per cent rise in value per trans­ac­tion over the pre­vi­ous 12 months – a stand­out re­sult, given that dur­ing the pre­ced­ing re­view pe­riod the fig­ure was hov­er­ing be­tween 1 and 2 per cent.”

How­ever, it has not all been plain sailing for sec­tor lead­ers. Domino’s share­hold­ers were not im­pressed when Aus­tralian and New Zealand same-store sales fell short of its guid­ance. And both Domino’s and Pizza Hut have faced wage pay­ment con­tro­ver­sies over the past year, though both have taken steps to rec­tify the sit­u­a­tion.

“Domino’s an­nounced its own investigations into wage frauds and ap­pointed busi­ness ad­vi­sory firm Deloitte to ex­am­ine its com­pli­ance pro­cesses,” says Vuong. “Pizza Hut signed a com­pli­ance deed with the Fair Work Om­buds­man to en­sure em­ploy­ees re­ceive the right pay and en­ti­tle­ments, and en­gaged a

third-party pay­roll provider to help fran­chisees meet their wage obli­ga­tions.”

ENOUGH ROOM

De­spite the con­tro­ver­sies, Vuong be­lieves there is enough room in the $3.7 bil­lion mar­ket for both lead­ing brands to suc­ceed.

“Aus­tralia’s pop­u­la­tion growth, es­pe­cially in the outer sub­urbs of cap­i­tal cities, will con­tinue to open up new mar­kets,” he says. “In fact, the growth is now out­pac­ing many

I be­lieve the most im­por­tant thing we do is re­spect the fact that peo­ple have a lot of calls on their in­come. If they de­cide to spend some of their money with us, we’re go­ing to make sure they

feel wel­come and val­ued.

ex­ist­ing pizza fran­chises, which is cre­at­ing op­por­tu­ni­ties for new busi­nesses.”

Vuong also sees op­por­tu­ni­ties for smaller pizza companies that can dif­fer­en­ti­ate them­selves from the ma­jor chains. Al­ready nu­mer­ous small, in­de­pen­dent and lo­cally fo­cused pizza restau­rants are work­ing across Aus­tralia, he says. “Pro­vid­ing pre­mium, gourmet or even healthy piz­zas could en­able oth­ers to de­velop their own niche in the mar­ket.”

Also pos­si­bly work­ing in their favour is the grow­ing pop­u­lar­ity of on­line or­der­ing ser­vices like De­liv­eroo, Foodora, Menu­log and Ubereats.

“One of the most sig­nif­i­cant tech­no­log­i­cal ad­vances over the past five years has been the wide­spread im­ple­men­ta­tion of on­line or­der­ing sys­tems among the in­dus­try’s larger play­ers,” says Vuong. “Smaller companies tend to lack the cap­i­tal to in­vest in cus­tomised soft­ware, or the sales vol­umes to jus­tify the cost of the in­vest­ment. Third-party plat­forms take a cut of pro­ceeds in ex­change for pro­vid­ing the op­tion of or­der­ing on­line, which can ex­pand a smaller busi­ness’s cus­tomer base.”

MA­JOR ROLE

All along, Crust Gourmet Pizza has been play­ing a ma­jor role in trans­form­ing pizza from ba­sic fast food to an au­then­tic din­ing ex­pe­ri­ence.

“Ours has al­ways been a pre­mium prod­uct of­fered at a pre­mium price,” says gen­eral man­ager Re­nee North. “We cre­ated a niche by fo­cus­ing on qual­ity in ev­ery­thing from the in­gre­di­ents to our de­liv­ery ser­vice, and we don’t dis­count as a gen­eral rule.”

The mar­ket has changed sig­nif­i­cantly since 2001, when the first store opened in An­nan­dale, in in­ner Sydney.

“Aus­tralia is in the mid­dle of a food rev­o­lu­tion,” says North. “Third-party de­liv­ery ser­vices are pro­vid­ing easy ac­cess to an end­less choice of cuisines, and this is chang­ing and frag­ment­ing the mar­ket. Qual­ity and con­ve­nient meal op­tions com­bined with grow­ing aware­ness of health and well­ness are driv­ing fur­ther change in terms of of­fer­ings and ways of help­ing con­sumers man­age their busy lives.”

To stand apart from the in­creas­ing com­pe­ti­tion, Crust is fo­cus­ing on ways to im­prove the cus­tomer ex­pe­ri­ence. “We have a prod­uct in­no­va­tions chef and sup­port team who are em­ployed to de­velop new menu items,” says North. “We like to stay ahead of the lat­est food trends at home and abroad so we can in­tro­duce new ideas be­fore they be­come main­stream.”

Crust has added sal­ads and tapas to the menu to help cater for a wide range of tastes and di­etary re­quire­ments. “The launch of our first ve­gan pizza last Novem­ber was so suc­cess­ful we have in­tro­duced two more ve­gan prod­ucts.”

Crust plans to con­tinue to de­velop two new ar­eas of busi­ness next year. The first is a cor­po­rate cater­ing ser­vice, tap­ping into the lu­cra­tive lunchtime mar­ket.

“We’re of­fer­ing stream­lined or­der­ing through a new be­spoke cater­ing plat­form, and de­liv­er­ing di­rect to meet­ings and events,” says North.

The sec­ond is an al­co­hol-de­liv­ery ser­vice, which won the award for Best Food & Bev­er­age In­no­va­tion at the Quick Ser­vice Res­tau­rant Me­dia Awards.

“Cus­tomers in some ar­eas of Vic­to­ria can now or­der beer, wine or cider with their pizza, and we’re plan­ning to roll out this op­tion across Aus­tralia,” says North.

CON­SUMERS LOSERS

Mean­while, Pizza Ca­pers gen­eral man­ager Sunny Olak be­lieves con­sumers were the losers in the big chain price war.

“Those brands sac­ri­ficed qual­ity and gen­eros­ity in a fight to ac­quire cus­tomers at the low­est pos­si­ble cost,” he says. “We’re bring­ing it back to pro­vid­ing a good, gen­er­ously topped pizza, and we in­tro­duced the Tracker Tracker cam­paign as a cheeky way to chal­lenge our com­peti­tors in taste and qual­ity, a space we know we can win.”

He be­lieves con­sumers are look­ing for fast food that is also real food made from fresh, qual­ity in­gre­di­ents. “Of course peo­ple are value-con­scious too, but, in our ex­pe­ri­ence, they’re happy to pay that lit­tle bit ex­tra for a qual­ity meal.”

Olak con­sid­ers in­no­va­tion to be as

Now the com­pany is ex­per­i­ment­ing with pre­par­ing, cook­ing and de­liv­er­ing a pizza

within 10 min­utes.

fun­da­men­tal to suc­cess as the over­all eat­ing ex­pe­ri­ence. “We pride our­selves on our abil­ity to be in­no­va­tive, not just in terms of new pizza flavours but also in the way we cater for dif­fer­ent oc­ca­sions,” he says. “For ex­am­ple, our lunch menu in­cludes the Phat Boy Pizza Wraps range.”

He also ac­knowl­edges the chang­ing role food plays in a dig­i­tal age. “Food is a very im­por­tant part of our cus­tomers’ so­cial lives so it needs to be made to share – and not just around the ta­ble,” he says. “So­cial me­dia and blog­gers are hugely in­flu­en­tial, so the food must be Instagrammable too.”

Pizza Ca­pers aims to re­cruit more young mil­len­ni­als next year with spe­cial stu­dent prod­uct of­fers, events and an exclusive sec­tor part­ner­ship with Red Bull. A Tracker Tracker on Tour cam­paign will also de­velop the role of the brand’s con­sumer cham­pion.

“He’ll be tour­ing the world dis­cov­er­ing dif­fer­ent cuisines, which will then ap­pear as new flavours on our menu,” says Olak. “We’ll be kicking off with a spin on trend­ing dishes from Ja­pan and the US, and fol­low­ing up with more in­ter­na­tional top­pings over the com­ing months.”

There are also plans to ex­pand Pizza Ca­pers’ range of ve­gan piz­zas and cal­zone by re­leas­ing new flavours twice a year.

“We know our cus­tomers are open to new experiences and ap­pre­ci­ate our in­no­va­tion,” says Olak. “We have the awards to prove it – we re­ceived Canstar’s Most Sat­is­fied Cus­tomer (Pizza) five years in a row.”

DIY CON­CEPT

Over at Pizza Pasta Please P3 in Sydney’s west, the con­cept is built around speed, choice, fresh­ness and value in a fam­ily at­mos­phere. Cus­tomers can con­struct their own piz­zas from a range of bases, sauces and top­pings.

“We then cook your pizza in front of your eyes in just one minute and 45 sec­onds,” says owner An­drew Os­borne. “If you pre­fer pasta, you have the same free­dom of choice in terms of both the pasta and the top­pings, and your meal is ready in the same time.”

Os­borne says the brand was four years in the mak­ing, in­clud­ing in­vest­ment in the ser­vices of a psy­chol­o­gist and cog­ni­tive sci­en­tist, who helped him to shape the long-term strat­egy. But Os­borne claims not to have spent a cent on mar­ket­ing or ad­ver­tis­ing.

“Our suc­cess so far is all down to word of mouth,” he says. “Peo­ple like the fact we pro­vide fresh, tasty food the whole fam­ily can af­ford to en­joy – you pay $12.99 for any pizza or $15 for a bowl of pasta big enough for two peo­ple to share.

“We also cater for ev­ery pref­er­ence with op­tions in­clud­ing gluten-free, ve­gan and halal. And I be­lieve the most im­por­tant thing we do is re­spect the fact that peo­ple have a lot of calls on their in­come. If they de­cide to spend some of their money with us, we’re go­ing to make sure they feel wel­come and val­ued. They ap­pre­ci­ate that – and they tell their friends.”

There is also an­other side to the story. The com­pany won the 2017 Camp­bell­town Lo­cal Busi­ness Award for be­ing the most in­clu­sive em­ployer in the re­gion.

“We are com­mit­ted to pro­vid­ing op­por­tu­ni­ties for peo­ple of all abil­i­ties, and many of our staff are deaf,” says Os­borne. “In­clu­siv­ity is a win-win strat­egy. Peo­ple who find it hard to get a job have a chance to earn a liv­ing, and we have a very ca­pa­ble, ef­fi­cient and loyal work­force while other brands are strug­gling with an in­dus­try­wide skills short­age.”

So far, eight fran­chisees have been ap­proved and Os­borne ex­pects to have 10 stores up and run­ning by the end of next year.

“Our fo­cus is on sus­tain­abil­ity as well as growth,” he says. “The ba­bies and chil­dren who come in to­day will be our tar­get mar­ket in 15 or 20 years’ time, so we want to make sure the whole fam­ily has a re­ally good feel­ing about the brand.”

Mean­while, Vuong ex­pects the over­all mar­ket for pizza to con­tinue to grow steadily over the next five years. “I think we’ll see more of what we’re see­ing now,” he says. “Stiffer com­pe­ti­tion among fran­chises and from ex­ter­nal com­peti­tors will drive in­creased ex­pen­di­ture on tech­nol­ogy along with faster prod­uct in­no­va­tion.”

Bao Vuong

Bet­tina Kurnik

Pizza Ca­pers

La Porchetta

Crust

Pizza Ca­pers

‘We ap­proached Nir­vana since we

wanted to join an in­no­va­tive and rep­utable beauty salon brand. More than just join­ing a fran­chise, we be­came part of a fam­ily....Their sup­port and

‘We ap­proached Nir­vana since we knowl­edge has been in­valu­able in

wanted to join an in­no­va­tive and our ini­tial start-up and sub­se­quent

rep­utable beauty salon brand. More growth... I feel lucky to be part of such

than just join­ing a fran­chise, we be­came a pro­fes­sional or­gan­i­sa­tion.” part of a fam­ily....Their sup­port and knowl­edge has been in­valu­able in our ini­tial start-up and sub­se­quent growth... I feel lucky to be part of such

a pro­fes­sional or­gan­i­sa­tion.”

- Ste­wart, East Sydney Fran­chisee PIZZA STATS

IbisWorld’s Pizza Restau­rants and Take­away in Aus­tralia re­port in June found:

The sec­tor has 4004 busi­nesses In­dus­try rev­enue sits at $3.7 bil­lion, with prof­its of $269.7 mil­lion

Rev­enue is ex­pected to grow by a com­pound an­nual 2.8 per cent over the next five years

Ac­cord­ing to Euromon­i­tor In­ter­na­tional:

Domino’s Pizza is the mar­ket leader within the pizza con­sumer food­ser­vice sec­tor in Aus­tralia, with a 33 per cent value share last year

Value per trans­ac­tion within chained pizza con­sumer food­ser­vice rose by 5 per cent last year from 2015

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