Sbarro Holdings Inc. has closed 155 company-owned units in North America.
According to spokesman Jonathan Dedmon of The Dilenschneider Group, the closures of Melville, N.Y.-based Sbarro’s corporate locations will not affect the brand’s franchised locations in the United States.
“This action represents an important step toward improving the financial performance of the company and is designed to facilitate continued growth and investment in the brand,” Dedmon said in a statement. “This action is part of a series of steps taken and planned by the new leadership team that took over in 2013.”
He added that the closure of underperforming locations will significantly improve the profitability of the company.
Even accounting for Wednesday’s closures, Sbarro has more than 800 units worldwide, including 81 that opened in 2013. According to Nation’s Restaurant News’report, Sbarro had 417 company-owned locations and 174 franchised units in the United States at the close of its 2012 fiscal year.
Last October, the company debuted a fast-casual concept, Pizza Cucinova, in Columbus, Ohio, as part of a strategy to move the brand toward a more upscale positioning beyond Sbarro’s mostly nontraditional locations. Two more Pizza Cucinova units are expected to open in Ohio in March and April.
Sbarro’s plans also called for a new prototype for in-line real estate — not malls or food courts — called Sbarro Brooklyn Fresh. Like Pizza Cucinova, the Brooklyn Fresh prototype would focus on made-to-order pizzas.
Chief executive David Karam, who took over for Jim Greco in March 2013, said at the time of the Pizza Cucinova launch that Sbarro still planned to grow with mall and food court locations.
According to NRN’s Top 100 census of chains ranked by U.S. systemwide sales, Sbarro’s domestic sales fell 5.66 percent in its 2012 fiscal year to $400 million, compared with $424 million in fiscal 2011. The report also found that Sbarro’s total domestic unit count fell 3.27 percent to 591 locations in fiscal 2012 and that the chain’s market share within the Top 100’s limited-service specialty segment decreased.
Darren Tristano, executive vice president of Chicago-based Technomic Inc., called the move a needed case of “addition by subtraction.”
“At this stage, it might be too little too late for them,” he said. “If they go in this direction, they’ll have to close their losers and focus on the winning locations with higher opportunity for them.”
Sbarro not only was right to cull some of its lower-performing units to allow for the pivot away from its food court and onsite heritage, he said, but also prudent in developing new prototypes and possibly retrofitting what works into the legacy Sbarro system.
“It’s very difficult to rebrand stores, but it’s easier to integrate learnings through new recipes, items or equipment [from Pizza Cucinova or Brooklyn Fresh],” Tristano said. “If you revamp current stores wholesale, the current customers would be alienated. This is a slower shift, so customers can evolve with Sbarro and not lower their visit frequency.”
Sbarro’s more recent strategies to enter the fast-casual pizza space with Pizza Cucinova and transition Sbarro away from malls toward in-line real estate with the Brooklyn Fresh model make sense given the way the pizza segment is evolving, Tristano added. He said the four major chains have their points of differentiation — limited-time offers at Pizza Hut, renewed quality at Domino’s, a long-running quality emphasis at Papa John’s and development in underserved markets for Little Caesars — and that the fast-casual pizza space is starting to achieve scale and hit its stride.
“Sbarro was always a good lunchtime option, which is now more competitive in the fast-casual space, and at dinner they’re still up against independent restaurants,” Tristano said. “There are more options than ever in food courts, where Sbarro has lost a stronghold. It just shows brands need to continually evolve. It’s a must-have change, not a nice-to-have change.”