Pie Five Retracts as it Banks on New 'Goldilocks' Prototype

    The company closed eight stores in the second quarter.
    Finance | February 2019 | Rachel Taylor

    flickr: Eli Christman

    While first generation Pie Five stores are closing, the brand is focused on opening new locations with the new Goldilocks prototype in the future.

    Pie Five continues to search for footing in the aggressively changing pizza wars. RAVE Restaurant Group’s fast casual—it also operates Pizza Inn—closed eight stores in the second quarter of fiscal 2019, announced February 6. This brings the footprint to 65 Pie Five stores (one company run). There were 10 corporate stores in the year-ago period.

    Pie Five’s same-store sales declined 3.6 in Q2, while total systemwide retail sales dropped 11.5 percent primarily due to a decrease in average units open during the quarter.

    READ MORE: A look back at Pie Five's 2018 retraction.

    Even though Q2 results remained sluggish, Pie Five has several turnaround initiatives in the works. Last fall, Pie Five launched a new, more efficient prototype named the “Goldilocks” layout. “This model focuses on speed and simplicity with a limited menu and an emphasis on building off-premises sales through carry out online ordering and third-party delivery,” RAVE president Bob Bafundo said during a call last September.

    The new prototype is a part of the brand’s strategy to adapt along with shifting consumer preference. By focusing on off-premises dining, online ordering, and to-go options, the company hopes it can stabilize itself for future growth, Bafundo said on a February 6 call.

    “At Pie Five, we’re addressing restaurant-level challenges and stabilizing the system for future growth,” Bafundo said. “With research showing changing consumer preferences, Pie Five is shifting toward a business model with an expanded focus on delivery, online ordering, carry-out and drive thru initiatives.”

    “Our menu mix data validates this strategy is working and led us to create the Goldilocks prototype that improves the unit economics and highlights off-premise dining options,” he added. “We believe this model is a robust solution to combat rising real estate costs, labor pressures, and changing consumer demand.”

    RAVE chief executive officer, Scott Crane, said the company would continue to consolidate first-generation stores and shift completely toward the new model.

    “We’ve identified strategic multiunit partners that are poised to deliver growth beyond our initial expectation,” Crane said. “At Pie Five we’re seeing trends that indicate we’re turning the corner. The shift in focus to a more efficient model will take time as we had do restaurants in our pipeline. We are confident that Pie Five is gaining, it’s starting and continuing to gain traction.”

    Pie Five’s menu mix is also undergoing changes necessary for the brand to compete with other fast-casual pizza chains. Consumer response has been positive over the past quarter since the brand launched its 14-inch shareable pizzas and low-carb cauliflower crust.

    Per Forbes, the cauliflower offering was so popular the chain had to order 15 percent more of the crust than what it currently sells for gluten-free crust within four weeks of launch.

    “As expansion continues for this new model, the Pie Five system will only get stronger,” Bafundo said. “New products like our 14-inch shareable pizzas and cauliflower crust, along with the online ordering and delivery continue to exceed our expectations.”

    Pie Five is planning to test new products like calzones, which it hopes to roll out in 2019.

    As a company, RAVE is getting back on track, Crane said. After two challenging years, RAVE is on solid footing with a shored-up balance sheet, improved cash position, and is regenerating positive cash flow from operations. “Our investment new menu offerings, updated technologies and operational processes have given us confidence in our ability to continue to deliver results for our consumers, franchisees and shareholders,” he said.

    RAVE’s revenue decreased 23.9 percent to $3.2 million in the second quarter of fiscal 2019 compared to $4.2 million in 2018. Allen attributed the decreased revenue to the reduction of company-owned stores as the company shifts to an almost exclusively franchised restaurant brand.

    RAVE’s Pizza Inn concept reported a solid quarter with a same-store sales increase of 2.7 percent compared to the prior year. Pizza Inn’s total retail sales increased 1.8 percent year over year. Bafundo added. “Year-to-date, Pizza Inn comparable store retail sales are up 2.5 percent compared to the same period of the prior year, while total domestic retail sales are up 1.1 percent.