Industry News | April 24, 2009

Marco's Opens New Store, Reworks Unit Goals

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Nearly seven months ago today, QSR spoke with the ambitious pizza chain Marco’s Pizza. At that point its goal was to reach 500 stores by 2010. What its leaders didn’t know was Wall Street would completely collapse in the coming months and the worse was still yet to come.

A little more than 200 days later Marco’s is now reevaluating that 500-store strategy.

Growth hasn’t completely stalled, however. The quick-serve opened its first California location today in Livermore in northern California with Nidhi and Deepak Gupta, area representatives for the brand.

“The lack of credit has slowed the rate of store openings, so our original 2010 goal is no longer realistic, but Marco’s is still growing steadily,” says the company’s CEO, Jack Butorac.

“We are on track to open at least 40 new stores total by the end of 2009 and more than twice that number in 2010.”

If the company hits all those numbers that leaves it roughly 200 stores short of its original goal.

“Marco’s is working to establish alternative financing sources for new franchisees,” Butorac says.

According to him, the company’s leasing program will increase rates of new store openings in the future.

Despite slowing growth numbers, consumers are still frequenting the pizza chain.

For 2008, same-store sales were up 7 percent for company-managed stores and more than 3.5 percent for franchised units.

“Our experience has been that people gravitate toward quality during recessions,” Butorac says.

It’s not just Marco’s customers that seem to be in a buying mood. Marco’s is also taking advantage of the deals the recession has created.

“Great locations are available and we’re snapping them up,” he says. “Rental fees are more attractive and tenant improvements are also in our favor. This recession has contributed to a 25 to 30 percent reduction in the cost of our average store.”

Despite the deals to be had in the real estate arena, Butorac maintains that the company’s biggest challenge is the scarcity of credit for franchisees.

“Because of some knowledgeable banks, private equity, and our own captive finance and leasing company, Marco’s may be very near the end of that constraint,” he says. “In this recession, Marco’s Pizza is fortunate and we know it.”

--Blair Chancey