If founders, chefs and other creatives are the beating heart of the restaurant industry, then franchisees are the veins delivering their ideas to all corners of the globe. Franchising is critical to the success of the industry, allowing brands to quickly scale their big ideas using other people’s capital. And whether it’s a mom-and-pop restaurant owner with one or two franchised restaurants or a seasoned veteran whose influence in the industry is well-known, franchisees — with all their individual attributes, styles and personalities — make a huge impact on the success of a business.
In this week’s installment of Franchisee Spotlight, we’re featuring Kal Gullapalli, the second-largest Marco’s Pizza franchisee, who operates 51 locations across three states and won the Franchisee of the Year award from the International Franchise Association. We spoke about his journey from owning gyms and spas to the restaurant industry and his goals moving forward.
Store count
MPZ Holdings has 110 stores: 51 Marco’s Pizza locations, two Dave’s Hot Chicken locations and the rest are European Wax Centers. All restaurants are located in South Carolina, Florida, and Georgia.
How he got to the restaurant industry
When I graduated college, I actually worked on Wall Street for about seven and a half years and worked at Merrill Lynch…. My sight was going back to my first job, which was working at Little Caesars at 17. I always had a dream of owning 100 of them….In 2016, I became a member at Orange Theory and I became friendly with the owner and started to understand the economics of franchising… In 2017, I opened up my own Orange Theory fitness and sold them in 2019. In 2018, I bought four European Wax Centers that were underperforming locations in Boston and I turned them around in three months. Over the next two and a half years, I grew that portfolio to 47 locations in five states.
During the pandemic, European Wax Center really took a beating. So I felt I needed to capitalize on what was winning. At that point, I needed some diversification, so I reached out to the top three or four pizza guys, and Marco’s seemed like the best fit. They had the best runway in terms of growth. They had opportunities for me to both purchase existing stores and grow new stores. It also had the best product of the top pizza players. We amassed 51 stores over the last two and a half years.
Advantage of working for a mid-sized brand
I think working for a high-growth brand you have the ability to pick your territory and really partner with the franchisor. It becomes a little more collaborative than with some of these larger brands, which are kind of ‘do what we say.’ Having a direct line to the CEO is nice, especially when you're the second largest franchisee in the company. I think that's what attracted me to Marcos… having access to a growing company that wants to listen to you.
Franchisee of the Year
I was surprised when Marcos told me about [winning the award]. It was nice to be recognized on a national level. I don't think I've ever won an award like that. I'm a brand ambassador: I live, eat, and breathe Marcos. Most franchisors appreciate that…. When you look under the hood, we’re not perfect, but we are a company that continues to try over and over. I think the franchisor appreciates that we're not giving up and we're always trying to grow and get better.
Economic Hardships
A big one is inflation. In the last three months, it's certainly abated quite a bit. The cost of cheese has come down drastically in the last three months. But prior to that, it was tough because you had the price of cheese and pepperoni going up like crazy. And we didn’t have the ability to really [raise prices much] because our number one competitor is a value player…. Also, the cost of building a location has gone up. Marco’s new development team is doing some value engineering and getting the cost to build out drastically lower… you really need your franchisor to work on reducing costs, especially in an inflationary environment like this.
Goals
We have 51 stores…but our goal over the next two to three years is to grow our footprint to 80-100 stores and see where we are at that point. We’re always going to grow. Once we’re at 100, we're not going to grow at the pace that we've been going for the first five years because that's tough to sustain. But we hope that over time we’re adding 10-15% to our portfolio every year and it becomes a real sustainable business that can feed many families.
Scaling challenges
The bigger you get, you run into problems with finding the right people to take you to the next level…. The person that takes your business from one to 10 locations is a very different person than the one who takes it from 100 to 200 locations. As a CEO, do I have the skillset to manage 100 locations or 200? As the major shareholder in my organization, I will know the right time for me to step down and have someone else take on the role, or if I have the energy and resources to take it on, I’ll do it myself.
