QSR 50 | August 2012 | By Kevin Hardy
The Pizza Prodigy
They like to say they’re “purposefully simple.”
But to Papa Murphy’s executives, the saying is more than just lip service. It’s a way of life and business for the growing company that has paved its own route to success in the pizza segment.
Simplicity is found across all levels of the business. Stores are small and efficient. The lack of ovens and freezers cuts clutter and keeps franchise, utility, and maintenance costs low. Shorter hours keep labor costs down. The low overhead allows Papa Murphy’s to offer its signature Take ‘N’ Bake pizza at prices often significantly lower than competitors’ hot pizza.
With its organizational simplicity, the brand is able to invest more in ingredients, making what it believes is a fresher and better-quality pizza than competitors. Most of a store’s square footage is dedicated to pizza creation.
And the take-and-bake concept, in which customers personalize their toppings in the store and bake the pizza at home, lends itself well to a customer-first mentality in all Papa Murphy’s does: Families get the exact pizza they want and it’s ready whenever they are.
That might explain why Papa Murphy’s scores some
of the highest customer satisfaction marks in the business.
“Clearly one of our competitive advantages is the simplicity of our concept and how focused our stores are,” says CEO Ken Calwell. “We’ve got a very simple concept and we’re a unique concept.”
Papa Murphy’s, now in 37 states, still has a ways to go toward national name recognition. But company leaders are confident that by growing market by market, it will soon become a national brand.
In 2011, Papa Murphy’s sales climbed to $702 million, up 10.6 percent over 2010. The chain added a net 42 stores in 2011, ending the year with 1,283 units.
The U.S. pizza segment did just under $30 billion in sales last year, up about 1.5 percent from 2010, according to Technomic. Meanwhile, limited-service restaurants as a whole saw a 3.1 percent growth in sales last year.
Based in Vancouver, Washington, Papa Murphy’s has a high concentration of stores in the Pacific Northwest. In the past, new stores sometimes opened one at a time in new markets that had little or no brand awareness. That’s something Calwell has worked to change since taking the helm in June 2011.
Executives are now focusing growth on trying to expand within specific markets, rather than just looking to get a foot in as many overall markets as possible. That allows a better leverage of marketing dollars, which local franchisees appreciate.
“We want to go one market at a time, choose our markets very carefully, and then expand deeply within one market so that we can get a critical mass awareness in that market before moving to the next,” Calwell says.
That measured growth sometimes tests Calwell’s patience. But he says focusing on individual markets creates more stable and sustainable growth in stores.
“What keeps me up at night is that I want to be national immediately, because you know you’ve got a great brand. It kills me when I hear people say they’ve never heard of us,” he says. “But I know the smart long-term strategy is to build a market at a time. I want to be able to take this to a national brand sooner rather than later.”
Sometimes it’s hard to convince people to try Papa Murphy’s in markets where take-and-bake is a new idea. By opening several stores in an area, it’s easier to get the word out en masse about what it is and get people to try the concept.
“Our objective [in new markets] is to get as many people as possible to try it. Because once they try it, they are a believer. Once that happens, we have very loyal customers from there,” says Jenifer Anhorn, the chain’s chief marketing officer.
The concept, positioned as fresh, customized pizza, practically sells itself.
Anhorn says employees will go out of their way to make the exact pizza customers want, whether it be a low-carb, stuffed, or original pie. The dough is made from scratch, the cheese is grated on site, and vegetables are chopped fresh every day.
“In the pizza world, we’re really unique in the fact that we prepare everything fresh,” Anhorn says. “Our customers say they can see and taste the difference because everything is fresh. It makes a big difference.”
Without a national television presence, Papa Murphy’s relies on public relations firms to help disseminate its message in new markets. The company uses local print, television, direct mail, mobile advertising, and coupons to target customers, the core of which are families.
“We are primarily a dinner for a family,” Anhorn says. “You can feed a large family for not very much money per person.”
Because the product is finished at home, Papa Murphy’s sees itself competing against grocery and pantry items, as well as other pizza chains. But by having consumers bake the pizza in their own kitchens, there’s an intangible quality that other restaurants can’t replicate. Filling your home with the aroma of piping hot pizza is an experience more meaningful than just bringing home a cardboard pizza box.
“It’s something people really take pride in because they are part of the process,” Anhorn says. “There’s more pride in serving our pizza to family and friends because you get some of the credit.”
Fred LeFranc, managing partner, CEO, and president of consulting firm Results Thru Strategy, says relying on the home connection is a strategy similar to one used by frozen pizza purveyor DiGiornio, which positions itself as just as good as delivery pizza, but made at home.
“It’s the same angle,” he says. “It just tastes better if it comes out of the oven in your house. And that pizza is going to be delivered much hotter than at a delivery or carryout place. Clearly they’ve struck a chord with consumers.”
LeFranc says Papa Murphy’s disciplined approach to growth could realize big pay-offs down the road. “If they can grow in a way that lets them have enough name recognition, that’s probably a better strategy than jumping across markets,” he says. “If you don’t control how the growth goes, then it’s just scattershot.”
Over the last 10 years, Papa Murphy’s has opened between 70 and 100 new stores annually, says Kevin King, the chain’s chief development officer.
“We think there’s no reason this can’t be a national brand and there’ll be a Papa Murphy’s in every market,” he says.
The typical franchisee runs two stores. King says franchisees usually come to Papa Murphy’s because of its low investment—it costs between $250,000 and $275,000 to open a new store—and the simple, unique concept.
Franchisees also enjoy a high quality of life because of shorter hours. Plus, a lot less can go wrong when there are no ovens, cooks, or drivers.
“A lot of people’s first reaction to the brand is, ‘Wow, a pizza place without ovens? That’s kind of weird,’” King says. “But so many of our franchisees come to us because they were customers. They know it and love it.”
As long as people are willing to eat at home, King sees a limitless future for the brand. And the economic downturn has provided even more opportunities for Papa Murphy’s.
“I think we are trying to take advantage of the current environment for both availability of real estate and growing a business in softer economic times with a brand that’s perfectly suited to take advantage of those opportunities,” he says. “We’re going to continue to push that during this period of time and grow as fast as we can as long as we do it well.”
Outside of the West Coast, Papa Murphy’s has had success in cities like Denver, Salt Lake City, and Green Bay, Wisconsin. The Dallas, Houston, and Phoenix markets have also proved lucrative.
Much of the Southeast and East Coast remains largely undeveloped by Papa Murphy’s, and that will continue, at least in the short term. The company will focus growth over the next few years in 14 markets, markets that aren’t new for Papa Murphy’s, but where the company hopes to establish a better presence before moving on.
In that sense, the CEO sees Papa Murphy’s as being similar to Chick-fil-A and In-N-Out Burger, both of which, he says, have marketing strategies that aren’t in your face and rely heavily on customer satisfaction and word of mouth like Papa Murphy’s.
Those brands each have loyal customers, though Chick-fil-A operates primarily in the Southeast and In-N-Out in the Southwest.
“We’re a lot like that,” Calwell says. “For the people that know about us, it’s a very loyal brand.”
Calwell has worked in the pizza segment for 17 years, including time at Pizza Hut and Domino’s. Aside from strategizing growth, he has his eye on improving store-level profitability and per-square-foot profit margins.
Much of that will hinge on new product development. Calwell says he’s placed a heavier emphasis on the creation and testing of new products since coming on board. Aside from pizza, the brand offers side items like cheesy bread and salads and desserts like cookie dough and cinnamon wheels. It recently launched its Mini Murph, a do-it-yourself pizza kit for kids.
“We’re focused on getting a good, robust new product pipeline,” Calwell says.
Using freshness, healthy options, and overall value and quality leverage gets Papa Murphy’s a wider audience than just the price-minded consumer looking for the best deal. Though executives say it can still compete for the value-minded consumer, its audience has always been broader than the typical young, male pizza consumer, Calwell says.
Papa Murphy‘s Timeline
1981 Papa Aldo's Pizza founded in Hillsboro, Oregon, by Bob Graham.
1984 Murphy's Pizza founded in Petaluma, California, by Terry Collins.
1995 Papa Murphy's International founded by Terry Collins and Bob Graham as a merger between Papa Aldo's Pizza and Murphy's Pizza. It becomes a privately held corporation with headquarters in Vancouver, Washington.
1997 Papa Murphy's launches its Stuffed pizza line.
2004 PMI Holdings Inc., based in Delaware, merges with Papa Murphy's International. During the partnership with the private equity investment firm, Papa Murphy's sees its domestic system-wide sales increase by more than 63 percent.
2004 Papa Murphy's launches its deLITE pizza line with less carbs and less calories.
2006 Opens first Canada store.
2008 1,000th store opens in San Antonio.
2010 Papa Murphy's sold to Lee Equity Partners, positioning the company for its next phase of growth as it continues to seek new franchise owners and open locations, primarily in the Southwestern and Southeastern U.S.
2011 Named "#1 Rated Pizza Chain" by consumers for a second consecutive year by Zagat's Fast Food Survey.
2012 Launches the Mini Murph Make 'N' Bake Pizza Kit, a culinary create-at-home kit for kids.
“Our consumer is much more the family, more loyal and more thoughtful,” he says.
Papa Murphy’s scores the highest among pizza chains on Technomic’s Consumer Restaurant Brand Metrics program. The company gets the highest score on 27 of 50 attributes measured, including those for food quality, portion for price paid, menu variety, and takeout.
On all of the customer service–related attributes, Papa Murphy’s takes the lead.
“They’re kind of hitting on all cylinders. It’s not like they’re just really high in value. They get really high scores there, but they also get great scores on having an excellent corporate reputation. They have success in a number of areas,” says Mary Chapman, director of product innovation for Technomic. “They score amazingly high among their pizza chain peers, but also among limited-service concepts.”
That’s validated by Papa Murphy’s many accolades, including being named Zagat No. 1 Rated Pizza Chain in 2010 and 2011, and Top 100 Food and Beverage company by Inc. Magazine from 2007 to 2009.
Aside from high scores on value and quality, Technomic data shows that Papa Murphy’s customers ranked it the highest of pizza chains for reputation. It also scores high on categories that judge a store’s welcome and comfortable atmosphere, even though customers don’t actually dine in.
“They’re executing everywhere,” Chapman says. “They’re executing everywhere they need to execute, according to their own customers.”
Brand identity is important for any product, and Papa Murphy’s is no exception. But it’s sometimes hard to define exactly what the chain is. Papa Murphy’s is first and foremost pizza, but by operating outside conventional structures, the brand has, in essence, created an entirely new market segment.
“People a lot of the time liken us to Pizza Hut, Domino’s, or whatever. Other people will say, ‘You’re more of a convenience store,’” Calwell says. “I don’t think we’re either. I think we are clearly pizza-focused. But we’re all about fresh, high-quality food—higher quality than our competitors. And we’re all about doing that for a good value.”
And as long as it does that, Calwell says, there’s no reason Papa Murphy’s can’t compete on a national level with the best in the pizza business.
“I definitely believe there’s room for a Papa Murphy’s in every neighborhood,” he says.
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