2010 September: How to Survive in a Bad Economy

2010 September: How to Survive in a Bad EconomyWhenever I speak at the Pizza Expo, invariably people ask me the same couple of questions, but mainly it is: ”How did you do it?” The “it” is an amazing story of how I took Romeo’s Pizza from one to 31 stores over the last five years –– with 21 of them coming in the last 18 months. The best way for me to answer is to explain the long, arduous process and how it takes time, planning, and execution over a period of years. So when I was asked by Pizza Today to write an article detailing and recounting our phenomenal growth during the worst recession in decades, I was excited to share with you, the small independent pizzeria owner, a story I hope inspires and helps you grow your operation as well.

 

 

In 2001, I bought a small mom and pop pizzeria in Medina, Ohio, called Romeo’s Pizza. It was operated very poorly, but yet still managed to do some good numbers and the pizza seemed pretty solid. This was my third pizza restaurant, and I looked forward to growing the business. I tweaked the recipes, added better management and began to see a lot of potential. Four months later, September 11th happened, and the world stopped. Sales dropped significantly as people began to experience some of the financial uncertainty that is still with us today.

In March of 2002, I asked industry consultant Big Dave Ostrander for some help in making my concept duplicable. My goal was to open multiple Romeo’s Pizzas and possibly start franchising, but first I had to fix the areas of my operation that were still broken and fine tune the areas that weren’t. So Big Dave invited me to the NAPICS food show in Columbus, Ohio, to meet him, and told me to enter the pizza contest since I would be down there anyway. After dreaming that I won that night, I entered the most popular of our pizzas –– The Butcher Shop –– and proceeded to win first place! The prize was an all expense paid trip to Italy to compete at the World Pizza Championships.

Over the next couple of years, I worked on my system. I had a strong grasp of food and labor costs, focused on marketing and customer service, and found ways to make my business not depend on me to run it day to day. I hired two managers and paid them well (both of whom own multiple Romeo’s Pizza stores today). I also put together a very aggressive bonus program for them. One of the biggest keys to success I have found is to have a bonus program for your manager. My managers get bonuses based on sales, labor cost and food cost. This gives them a vested financial interest in my business, which is priceless. I love to pay bonuses! Managers that don’t bonus in my company usually aren’t around long. Get your people invested in your business!

I spent about four years trying to perfect my system, focusing on menu engineering, training programs, operations manuals and marketing programs. During that time, I won the Best Pizza in the Midwest at NAPICS again, Best Gourmet Pizza in America in New York City, and was featured on the Food Network’s $10,000 Pizza Challenge. I have gone to Italy to compete at the World Pizza Championships 7 times as a founding member of the World Pizza Champions. Throughout, my main focus was always building a system that would allow me to open another store. I have identified three of the most important areas I focused on that led to the growth of Romeo’s Pizza. There are many other factors, including luck, but these three things are absolutely necessary if you want to grow your operation: • Defining your brand marketing strategy. • Creating a system. • Personal development.

Defi ning Your Brand Marketing Strategy Since December of 2008, Romeo’s Pizza has grown from 10 stores to 31. Same-store sales have risen 20 percent month after month during that time. We have beaten down the $5 pizza guys, destroyed the “Buy 1, Get 2 Free” guys, and have overcome an unprecedented marketing blitz this industry has never seen before by the Big 3. So the big question is how did we do it? What is the magic button that you can push to make all of that happen for you and your business? It all starts with marketing. Brand Marketing. While most of the smaller pizza chains and independents stopped advertising during the recession, we actually spent the most we ever have. More importantly, we changed the way we marketed. Being fed up with competing in the money mailers and coupon books for the best deal, we stopped doing them. Advertising is only a piece of marketing. It isn’t the only thing. We began to focus on building our brand. Branding is all about creating an image of your company that gives your customers and prospective customers confidence that your company and products will meet or exceed their expectations every time. Marketing your brand will continue to pay you back long after the coupons have expired.

The first step is to determine who you want to be and create your brand based on the customers that you want to attract. We wanted to attract loyal, value-oriented (not price driven) customers who appreciate quality over garbage — so we built our brand around them. I stopped using coupons as my marketing strategy and started to build real value into our offerings. I created package deals that would help Romeo’s keep our average ticket around $20. Some of the packages included a pizza with wings or a pizza with a salad, breadsticks and pop. We even had some two- and three-pizza packages. Recently, I created the “Romeo’s Pizza Build Your own Ultimate Supreme Pizza” with up to five toppings for only $13.99. It allows us to compete with the $10 price point and still maintain our position as a premium brand. We are going to truly have it for a limited time so that our promotional price doesn’t become a permanent price reduction.

I firmly believe that, as an industry, we need stop lowering our prices. Pizza is the most popular food in America, and the most economical for a family — yet many of us try to market solely based on price. I tell customers all of the time I would rather explain my price than apologize for my quality, and no matter how large we become, we will always use only the best possible ingredients on our pizza.

Once you determine what you want your brand to stand for, you must create marketing materials that represent that image. We built menus, flyers, magnets, door hangers, menuboards and box toppers with the highest quality paper and images, and put our brand “look” together. Our menu is the second most effective marketing tool we have (our pizza is the first). We are trying to attract people that are loyal and are not afraid to pay for quality; and all of our marketing materials, especially our menu, need to represent that. I also insert our menus everywhere. Today, we insert our menu in those same coupon books we shunned, but now we stand out. Our brand marketing image separates us from the barrage of coupons and cheap pizzas, and has allowed us to grow our sales system-wide 20 percent.

In your advertising you must communicate your unique selling proposition, or USP. What do you do that nobody else can do or say? At Romeo’s, we use only the best tomatoes from California, which go from the field to the can in mere hours. We make our own dough daily by trained dough masters in each of the stores. We have a specially blended cheese made in Wisconsin using provolone and mozzarella that is used exclusively by Romeo’s Pizza. That is the way we promote our brand. What can you say about your pizza that either no one else can say, or no one else has said? A lot of people use the same sauce we use or get their cheese from Wisconsin. A lot of people make their dough fresh every day … The difference is how we communicate it to the customer.

Remember, advertising is only part of marketing (the most expensive part!). Other areas of marketing we focused on were lazy customer cards, new mover programs, up-sell contests in the stores, local sponsorships and other direct mail pieces specifically targeted down to the carrier route for neighborhoods in which we wanted a better presence. We also give a menu and a magnet to every customer, and we put box toppers and bounce-back coupons on every pizza. Soon we are starting a rewards program that will be integrated with our POS system. I also have a weekly email that goes out to our database (and a text program as well).

The best way to win a customer is to give them a pizza for free. We look to give our pizza away at as many places as we can. I would rather give a group a bunch of pizzas for free than try to sell them for five bucks each (because I maintain my brand image and value, and I know that I will gain customers for life if they just try it). A lot of people are afraid to try new things, so you have to make it very easy to try your pizza.

Marketing is the lifeblood of your business, and it’s like a tree … you need to water it to make it grow, not wait for it to grow and then water it. But your operations have to meet the promises that your marketing makes, and that’s where creating a system comes into play.

The next area of focus for me was operations and creating a system. I wanted to have a very duplicable concept, and I spent four years trying to perfect it before I opened our second store. We constantly try to improve every aspect of our business, so the work on the system is never done. Some of the areas that we addressed were the look and appearance of the lobby, employees and food. We’ve standardized and weigh every pizza, sub and pasta dish. We set a strict dress code for our management and staff, and created and enforced an employee handbook. We also aligned ourselves with a POS system, which I feel is absolutely critical in duplicating your concept. I would never open a store without a POS system.

We also spent a lot of time and effort on documenting the way everything is supposed to be done. We created a food prep manual that details how to make everything we make, as well as an operations manual, which details how we operate a Romeo’s Pizza restaurant. Additionally, our employee handbooks detail what is expected from each employee in writing before they start. My goal was to create a system that would run my stores, allowing me to work on my system. If your store depends on you to be successful, then you haven’t created a strong enough system and you are not ready to grow. As we have grown, I often have to go back and change some of the policies and procedures, so I look at these manuals as a fluid document that has the rigidity to run the store, and yet has the flexibility to make changes for the better.

I attribute a lot of the growth of Romeo’s Pizza to personal development. I believe that in order to grow you need to become a master of many skills. You need to understand finance and accounting, you need to be able to hire and train good employees, and you need to become a strong leader. You need to be able to calculate food costs, create effective advertising campaigns, and be able to hear opportunity knocking. You also need to eliminate negativity and excuse making from your vocabulary. All of these skills can be learned, and I focused a lot on my own personal development. If you are weak in these areas begin investing in yourself. Take a class, read as many books as you can, and attend International Pizza Expo 2011 next March. People ask me all the time if I ever thought Romeo’s would be this big, and I can honestly answer “yes.” I truly believed we could.

I have tried to give you a glimpse into the process I took to build a successful pizza company. Our plans are to go back and tighten up our system again and add stores in 2011. We are looking at multiple DMA’s to grow and expand as we become a regional chain. Our goal for the next 10 years is to have 1,000 stores. We will also grow same-store sales as we continue growing externally through opening company stores and franchising. You too can create the business of your dreams. Get started today.