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Log In / Register | Apr 19, 2018

Fast Casual Pizza Operator Leaders and Laggards

Bret Thorn of Nation's Restaurant News reports on the fast casual pizza segment, which correctly lays out that Mod Pizza and Blaze are leaders in that segment. Mod grows mainly with company owned units and some franchisees, while Blaze does the opposite. Neither of these companies are publicly traded as yet, but each is vibrantly growing.

Compare this to two publicly traded fast casual pizza operators—RAVE Brands (RAVE) and Papa Murphy's (FRSH). Both companies have experienced rapid same-store sales declines, failed ad campaigns, some unit closings and concept issues. By reading their earnings calls last week, the major tactic going forward seems to be refranchising (selling) their company stores.

This leads us back to the skin in the game issue, with high turnover in these companies, and slimming down corporate to be a franchisor only, how can there possibly be the needed infrastructure to fix the brands? A franchise brand needs more than to be an ad fund manager and a franchise sales department.

The San Jose Mercury pointed out last week that Pieology closed 8 units in the Bay Area (mostly South Bay), to revert to franchisee expansion, but two units changed to franchisee status. In 2017, Pielogy surprisingly closed on high traffic Telegraphy Avenue, close to UC Berkeley.

Same story. Same issue.

With that kind of penetration in the South Bay, why weren't those stores working? if sales are too low, the brand has to be fixed. If rent is too high, that should have been considered in the first place. If they cannot get employees, that is an issue franchisees can't fix on their own.

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About john a. gordon

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John A. Gordon, founding principal of Pacific Management Consulting Group provides analysis and advisory services relative to complex restauant topics. This includes buy or sell due diligence, operational analysis and improvemenrs, expert litigation support and business investigation and analysis.

Gordon focuses on restaurant strategy, operations and financial management topics, and has a 45-year background in restaurant operations and financial management staff roles for both franchisors and franchisees. He is a certified Master Analyst of Financial Forensics (MAFF). He supports both franchisees and franchisors, and has a franchise standards and practices sub speciality.

Pacific Management Consulting Group provides creative, detailed and effective insight, independent research and analysis that is free of conflicts of interest. The company provides chain restaurant earnings and economics analysis, research, expert witness engagements, suppors both consulting and sell side equity research firms, due diligence and other analytical investigations. He routinely partners with other restauant subject matter experts in a variety of specialities.

Visit him at Pacific Management Consulting Group. Contact him by email or call (619) 379-5561. Gordon blogs on on his website and publishes discussion papers; his press clips and a real time restaurant analysis blog, http://www.twitter.com/JohnAGordon is included.

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Franchise Operations