LaRosa's Pizzeria saw system sales climb 7 percent in the Latest Year.

Respectable improvements in domestic systemwide sales and unit counts among the Second 100 Pizza chains are proving there’s still room for growth in the middle ground of this ever-competitive segment.

Evidence that operators are successfully squeezing even more sales from existing units, the seven pizza chains making the Second 100 cut for 2012 enjoyed an average of 7.4 percent U.S. systemwide sales growth in the Latest Year, while their average growth in net domestic locations was 2.5 percent.

The group registered net unit declines at Godfather’s Pizza, Round Table Pizza and Papa Gino’s, but those losses were offset by a 58-unit jump at Marco’s Pizza, where sales spiked 32.5 percent from $148.7 million in the Preceding Year to $197 million in the Latest Year.

Were it not for lending institutions remaining reluctant to share cash with expansion-minded franchisees, both numbers could have been better, said president of Marco’s Franchising LLC Jack Butorac.

“I wasn’t happy with that growth,” he said, noting that  franchisees working on Small Business Association loans called the process “time consuming, painful and expensive.”

At the beginning of 2013, Marco’s unit growth target for the calendar year was 104 stores, but with two quarters complete, the chain is six units ahead of schedule.

Data

• Second 100 Rankings and Results

“If we don’t hit 125 stores this year, I’ll be disappointed,” Butorac said.

His optimism is tied largely to a major franchise agreement signed with Family Video, a 700-unit video rental chain. According to Butorac, the privately held, debt-free chain is investing $100 million in the venture, which so far has seen the opening of 20 new stores, six of which have set sales records.

The Family Video franchisee is currently opening two stores a week, according to Butorac, who added that each new pizzeria is a traditional Marco’s unit abutting a Family Video store, with the concepts often linked by a door.

“By August their goal is to be opening three a week,” he said. “As of now, they plan to open [a total of ] 450.”

Despite just having added one unit in two years, LaRosa’s Pizzeria saw system sales climb 11.2 percent in the Preceding Year and 7 percent in the Latest Year. With 65 units, the chain’s estimated sales per unit, or ESPU, was $2.1 million in 2012 — about three times the $737,785 average ESPU of the other 17 pizza chains on this year’s Top 100 and Second 100 rosters and proof that the dine-in pizza parlor model remains strong, especially in and near LaRosa’s Cincinnati headquarters, where the majority of its stores operate.

Hungry Howie’s, which added only two stores in the Latest Year, saw domestic sales rise 8.8 percent to $290.8 million. Steve Jackson, president of the 548-unit Madison Heights, Mich.-based chain, credited its performance to a significant system overhaul following recession-related auto industry losses that began in 2007.

“Since we’re in Michigan, where the auto industry was decimated during the downturn, we had to do some self-evaluation,” Jackson said. What followed was a top-to-bottom store redesign, an increased focus on online ordering, a marketing push and equipment upgrades throughout the system. To date, about 10 percent of the chain’s stores have received the upgrades.

“Stores we’ve [refurbished] over the last three years have seen double-digit sales increases over our national averages. And those are our Michigan stores, where we’ve got [Domino’s Pizza and Little Caesars Pizza] to compete against.”

Despite the price slashing so prevalent in the pizza segment, both Jackson and Butorac said they have found bundled value meals are more successful.

“We didn’t want to bastardize our core product, so instead we created the Big Square Deal,” a $6.99, thin-crust rectangular pizza that yields 16 slices, Butorac said.

Jackson said Hungry Howie’s $5, $10, $15 and $20 bundled deals were designed to provide appropriate portions for single diners, groups of two or three, or larger parties like families.

“We decided it would be better to give them a few items to choose from instead of [the deal] being just one particular large [pizza] for $10,” Jackson said.

Like its key Michigan competitors, Hungry Howie’s recently launched a pan pizza after 18 months of research and development that included experiments with split-belt conveyor ovens and parbaking.

“Innovation is always helpful if you can prepare it correctly, then execute it,” Jackson said. “We played with it for about 10 years and then got serious about doing it right.”

By the numbers

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