Turnaround time at SbarroTurnaround time at Sbarro

Paul Frumkin

Jim Greco is only about 90 days into his new job as president and chief executive at Sbarro Inc., but the turnaround veteran already has big plans for the Italian quick-service brand.


Greco, who joined the 1,025-unit chain soon after it emerged from Chapter 11 bankruptcy protection in November, says management currently is in the process of executing a short-term 100-day plan that will include the launch of 10 test units in June. Those locations will showcase some of Sbarro’s new strategic initiatives — such as reformulated pizzas and made-to-order pasta dishes.


As part of his longer-term vision, Greco said he plans to shift the Melville, N.Y.-based brand away from its quick-service roots and into the fast-casual arena — a sector Sbarro executives have been eying for the past six or seven years.


“The vision is to be the preeminent fast-casual Italian brand worldwide,” Greco said. “We think it is a space that fits Sbarro well and one which nobody of any size has yet claimed. And we think it is one we can own in a relatively short period of time.”



Ups and downs 


The chain, which was founded by Gennaro and Carmela Sbarro in 1956 in Brooklyn, N.Y., has grown in fits and starts over the past 56 years. The company was owned and operated by the Sbarro family — chiefly, Mario, Anthony and Joseph — until 1985, when, with 83 company-
owned and 53 franchised locations, it was taken public. 


The brand was traded publicly until 1999 when the family took it private again. 


Late in 2006, Sbarro Inc., then with about 975 quick-service outlets globally, was acquired by private equity firm MidOcean Partners III LP for an estimated $400 million to $500 million. MidOcean voiced hopes of revitalizing the core brand and accelerating company-store openings. Officials also discussed their interest in the fast-casual segment.


By April of 2011, though, a debt-burdened Sbarro filed for Chapter 11, saying in its bankruptcy papers that it had been hit hard by economic conditions. At the time, it said rising prices for such commodities as cheese and flour presented a challenge that was further aggravated by the recession. As a result, the company said it suffered from unprecedented declines in traffic at shopping malls, where many of its outlets were located.


In 2010 Sbarro embarked on a turnaround effort, which included naming MidOcean managing partner Nicholas McGrane to the post of interim president and chief executive. Performance improved, the company said, but not enough to be in compliance with financial covenants.


In November the company exited Chapter 11 with a significantly reduced debt load and a new $35 million capital infusion from its lenders, as well as positive momentum. 


Action planning 


Greco is upbeat about Sbarro’s prospects. He said the short-term strategic plan calls for a focus on “people, place, product and positioning.”


To that end, Sbarro is revamping its pizza and pasta products. 


“We’re making tweaks to recipes and also are changing procedures,” said Greco, who most recently was chief executive of Bruegger’s and co-chief executive of parent Le Duff America. “We’ve hired consultants who have a lot of experience in the Italian space, and they’re helping us. We will have an even more desirable pizza offering and totally new pasta offerings that will be made to order.”


As part of the recipe reformulation process, Sbarro is making changes to items like its pizza dough and tomato sauce to improve taste and texture, he said.


“We contract to have our own tomatoes grown and packed in California,” Greco said. “That will remain the same, but we plan on adjusting the seasonings used in the sauce.”


The chain also plans to use better cheese in its dishes, he said.


Greco said guests will be offered several different choices of pasta and sauces. 


“Pasta will be made to order in sauté pans and with induction cooktops, which will mean new equipment for each outlet,” he said. The revamped cooking battery also will include new ovens.


These initiatives will be introduced to the public in early June at 10 test units that will be “designed to show what we’re doing and get feedback,” Greco said. And while the test units will not be fully redesigned, they will be updated, he said. 


To help address the “people” component of the plan, Greco said management has been holding seminars around the country with team members to introduce “a new culture of hospitality that we want every Sbarro to reflect. We’ve been training senior operations teams — vice presidents, trainers, district managers and GMs — to implement our new culture of hospitality.


“It involves things like how to recruit, hire, train and empower team members,” he said. “It also involves a new recognition and rewards program. At the 10 test units, we will have the best teams displaying our new culture of hospitality.”


To help with its new focus on “positioning,” Sbarro hired a firm specializing in brand positioning. 


“We had previously conducted a great deal of research and shared it with the firm,” Greco said. “They are helping us synthesize it into a positioning statement, which will guide much of what we do going forward, including the new store design in our test units.”


And while Sbarro does little advertising, the new positioning will be reflected in point-of-
purchase and marketing materials, as well as new menu items.


Greco said the grand opening of the 10 new test units also is expected to be “a big event with a lot of activities to support it. We’re working on things like live radio remote, mailings and VIP invitations.”


He said he has spoken to all of the chain’s major franchisees about the new changes — including the store updates — “and they’re very excited about the new ideas and seem to be very supportive.”


Of Sbarro’s 1,025 outlets, 625 are company owned — chiefly in the United States and Canada — while 400 are franchised. 


“Based on my experience, we think the cost of the renovations will be very modest,” he said. “The new equipment is not that expensive, and we believe we’ll be able to remodel the typical Sbarro for a very model price tag.”


Future focus 


While Sbarro will continue to grow — 50 to 60 new openings are planned for 2012 — Greco said the focus is not currently on “ramping up unit growth. The focus is on supporting unit growth in the pipeline and executing our strategy to improve the brand” — something he is optimistic the chain can accomplish.


“We are in a great segment, we have a great team of folks, we have the financial ability to fund the changes we’re planning to make, we have a clear vision and a well-thought-out strategy.


“If there are any headwinds, they would be what everyone else is facing: the weak recovery we’re in. Certainly, if economic growth were to improve, if the country adds jobs and the housing market starts to build, it will bode well for everyone in the restaurant industry.”


Sbarro is owned by a group of about 30 investors, of which the largest is Stone Tower Capital in New York. The chain generated systemwide sales of $420 million for the fiscal year ended Jan. 1, 2012, down from about $476 million in the year-ago period. 


Contact Paul Frumkin at [email protected].