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Sbarro CEO talks 'pizza-centric repositioning'

Sbarro CEO talks 'pizza-centric repositioning'

Mall-based chain branches out with standalone units, delivery and small menus

Consumers soon won’t have to go to a mall to get Sbarro pizza. They won’t even have to leave home.

The Columbus, Ohio-based pizza chain is set to open the first of four freestanding restaurants with traditional pizza chain menus in its home city — as well as carryout and delivery.

The opening of the locations is part of a major remodel and menu change at the concept, which only emerged from its second bankruptcy last year. The concept will remodel locations to open their kitchens and demonstrate to customers its meal quality, and it plans to shrink its menu to focus more on its strengths — pizza and stromboli.

In addition, the company is working on an app and online ordering that, ultimately, will enable customers at the company’s more than 800 locations to order their pizzas from their phones.

“We felt we had a lot of bonafides in pizza,” Sbarro CEO J. David Karam said. “Two years ago, we began the process for a pizza-centric repositioning. We’ll compete on the street with more traditional pizza concepts.”

Sbarro will open the first freestanding locations in the Clintonville neighborhood of Columbus, Ohio, in October. The locations will have delivery and carryout services and indoor seating for 20, as well as an outside patio. The other three locations, also in Columbus, will open over the next six weeks.

The locations will have a narrower menu. Over the years, Sbarro has broadened its menu from pizza and stromboli to include other Italian items like lasagna and other pastas. The chain is cutting from that menu to be more pizza specific. The standalone locations will have a menu more like those seen at traditional pizza chains like Domino’s Pizza or Papa John’s, including pizza, stromboli, subs, some pastas and wings.

“What you’re seeing in Columbus is the culmination of a couple years’ effort to tighten our brand position but compete in a much broader segment,” Karam said. Traditional pizza is a broader segment than Italian. As it is, 90 percent of Sbarro’s sales are for those core menu items — pizza, stromboli and beverages, Karam said.

The freestanding locations will also open with something else that’s big in the pizza sector: Technology.

The locations will open with online ordering. And Sbarro is working to develop an online ordering app for the iPhone and Android.

Customers will be able to use the app for orders at mall-based locations, too, but in the short-term that order will be done by phone. Anne Pritz, chief marketing officer for Sbarro, said that customers would be able to call the location from the phone they use.

Eventually, she said, that app will enable ordering at mall-based locations, too, once the company finishes adding back-of-house technology systemwide. “We will be embracing the new technology, and we’re very excited,” she said.

“The consumer is definitely expecting to have ease of ordering,” Karam said. “The fact that we’re launching [freestanding locations] with that is reflective of the fact that this is a well-thought-out plan that’s been in place for a year and a half to two years.”

Mall-based heritage

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Sbarro was founded in 1956 in Brooklyn, N.Y., but opened its first mall location in 1967, and has since become synonymous with the mall. Most of the company’s locations are in malls, airports or travel plazas, though it does have some standalone locations, particularly in international markets.

Declining retail traffic over the years and aggressive competition hurt the company’s business, and the chain filed for bankruptcy twice, first in 2011 and then again last year. After emerging from the second bankruptcy, Sbarro moved its headquarters from Melville, N.Y., to Columbus. Karam, chairman of Sbarro, was named CEO in 2013.

Sbarro since has been working on its comeback plan that now includes the pizza-centric menu and the development of more traditional units.

The company’s plan for freestanding locations is meant to be a complement to its mall presence, not a replacement.

“There are 900 malls in North America, and we’re in about 300 of them,” Karam said. “We wouldn’t want to be in all of them. It puts a lid on how many locations you can have. By being more of a mainstream pizza concept, you have thousands of new location opportunities.”

Sbarro is making many of these changes at its mall-based locations, too. The chain has started remodeling locations, with open kitchens to show the pizza being made. The company plans to remodel 25 stores this year. As it remodels those locations, it will change their menus to the more narrow, pizza-centric concept.

“We are limiting the menu offering and selling fewer menu items,” Karam said. By narrowing the menu, he said, the company can focus more on its core items. “We have better rotation and upgrade the quality across the board.”

The narrow menu has generated better sales by improving quality, executives said.

“We’ve seen the results,” Karam said. “We’ve seen a nice lift in sales. The consumer reaction has been positive. The quality is more consistent and much better.”

Contact Jonathan Maze at [email protected]
Follow him on Twitter: @jonathanmaze

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