2010 March: Tit for Tat

Bartering with other businesses can be a great way to bring in more customers, raise your profile in the community and reduce your overhead costs. And the current economic downturn has made trade an even more attractive tool for pizzeria owners and operators trying to get the biggest bang for their bucks.

“Especially with the state of the economy, business owners need to be innovative in order to gain market share and ensure their success,” says Chris Haddawy, an expert on barter and chief operating officer and co-founder of the Seattle, Washington-based trade association BizXchange. “Certain businesses that wouldn’t have embraced trade before are opening up to it now.”

In fact, most pizzerias use barter to some extent –– even if it’s just trading with another restaurant for gift certificates to be used for incentives or holiday gifts for employees. But even if your use of trade is much more extensive, there probably are ways you could expand and refine your barter strategy to maximize the benefit to your business.

Bartering, when done correctly, can be an excellent way to advertise and boost business –– all on a shoestring budget. Part of the secret, pizzeria owners say, is to know your customers before you start striking trade deals for advertising. For example, John Arena, co-owner of Metro Pizza –– which has five locations and a sixth under construction in the Las Vegas, Nevada area –– knows most of his customers find his pizzerias through the Internet. “I won’t do a trade for Yellow Pages ads because I know none of my customers use the phone book anymore,” Arena says. “But if I can do a trade for Internet advertising, I will. You have to pick and choose.”

Ty DuPuis, owner of the Flying Pie Pizzeria, with four locations in the Portland, Oregon, area, has a similar strategy. “Our customers are mostly family and kids,” DuPuis says, noting that he steers clear of bartering for advertising with radio stations whose listeners are older than his typical customer or geographically too far away, and instead provides pizza parties for local schools and sports teams in exchange for advertising on their Web sites, T-shirts and newsletters. “Schools and sports teams are the most effective type of customer creation for who we’re targeting,” DuPuis says. “You have to make sure you’re getting what you really need.”

Trade also can be an effective, low-cost way to motivate employees and build morale and loyalty. Many pizzeria owners do that by bartering for gift certificates, movie tickets or other small gifts to use as employee-of-the-month rewards or contest prizes. DuPuis barters to give his employees bowling or sledding parties for fun and bonding. “It makes the employees feel appreciated, taken care of and valued, and then they tend to do a better job taking care of your business,” says DuPuis, who has almost no turnover, with an average employee tenure of nine and a half years at his main location. “My food cost is only 35 percent, so it works out a lot cheaper on trade than paying for it upfront.” Arena sometimes uses his trade relationship with Southwest Airlines –– which began when the air carrier called him about 150 stranded passengers who needed to be fed –– to help a cash-strapped employee travel to visit a sick relative or deal with another family emergency. He also uses it to provide a vacation (for example, a trip to California wine country) for an Employee of the Year.

And, of course, trade also can be a way to get essential goods and services to keep your restaurant running at a lower cost. DuPuis started out by making partial trades for refrigeration repair and electrical work. The co-owner of Rise PizzaWorks, which opened recently in Charlottesville, Virginia, John Spagnola, traded with a nearby copy shop to get menus and guest checks printed. It pays to always be thinking about possible trades –– and to be creative: Arena recently found that he needed some extra workspace for back-office personnel; instead of looking for an office to rent, he approached his insurance company and offered to provide food for employee luncheons in exchange for the use of vacant cubicles. “They have empty space they’re not using that we have a need for, and they get the opportunity to provide their employees with a benefit at no cost to them,” Arena says.

The owner of Big Louie’s Pizzeria in Eureka, California, Harold Lawrence, says trade saves him substantial amounts of cash. “Let’s say I do $25 worth of trade. It costs me about $2.50 to do it, so I’m operating on about a 10 percent cost factor on that.” That’s partly why Arena trades so much, too. “We’re always interested in stretching our dollars as far as we can,” he says.

But there are some pitfalls to trade, too — most of which can be avoided by vigilance on the part of the pizzeria owner. It’s important to make sure that trading partners respect the value of your product, according to Arena. “There has to be reciprocity. If an airline wanted to get $600 worth of pizza in exchange for an airline ticket they value at $600, but I know I could book online for $300, I’d have to reject that,” Arena says. On the other hand, he adds, “We do frequent trade on a dollar-for-dollar basis with Bouchon, and they’re a world-class restaurant, and they’ve always treated us very fairly. That’s an agreement that works.”

Pizzeria owners who barter agree that trade is one area where smaller, independent pizzerias sometimes have an advantage. “As a family owned business, we’re able to do things a corporate entity would have to jump through hoops to do. We can make decisions on the fl y –– we don’t need to get anybody’s permission,” Arena says. “I think that’s where independents have a real edge in trade.” ?

Trade Associations

In the pizza business, direct barter probably is the most common way to trade. But that does come with some downsides – for example, it can be challenging to find a business that offers what you need when you need it and also has a need for that dollar amount in pizza, and record-keeping can be a hassle. In a trade association, businesses typically pay a fee to join, then build up “trade dollars” in an account when another member “purchases” their product on trade. Those dollars can then be used with any other member business.

For pizzeria owners thinking about joining a trade association, Chris Haddawy, chief operating officer and co-founder of the Seattle, Washington-based trade association BizXchange, offers some tips:

Check out the association. Ask how long it has been operating, how many members it has, and the dollar amount of business it does each year. Make sure it’s a member of the International Reciprocal Trade Association, a self-governing body for the barter industry.

Learn about its members. Ask for a list of members, and see whether enough of them offer goods and services you need and use, and make sure you would want to do business with those particular companies.

Consider whether the trade association is likely to bring you new business. For example, if there are only a few members located within your delivery area, it might not be the association for you.

Ask to talk to members who own or run restaurants. Also consider talking to members whose services you’d be most likely to use –– for example, screen printing or pest control or accounting businesses. Call and ask them how being a member of the association is working out for them.

If you do join, consider starting out slowly so you don’t end up in a situation where, for example, you’re making $5,000 a month in “sales” to other association members but only using $500 in trade. You might be able to do this by providing a set dollar amount in gift certificates to the exchange each month.

Allie Johnson
is an award-winning freelance writer who lives in Kansas City, Missouri. She writes frequently about food and business.