Pizza | September 2015 | By Maggie Hennessy

Vying for a Slice of the Pie

Whether improving quality or increasing convenience, pizza concepts are upping the ante to beat competitors.
QSR pizza brands improve business to better compete with major fast food chains.
Inspired by the customizable models of Subway and Chipotle, Blaze emphasizes quality and quickness. Blaze Fast Fire’d Pizza

New York–style, Neapolitan, New Haven, red, white, deep-dish, pan, flatbread. Any way you slice it, Americans love their pizza—to the tune of nearly $37 billion in annual sales, according to Technomic. But the industry that once thrived on phone delivery is evolving thanks to emerging fast casuals, expanding menus, and better ordering technology.

The massive pizza market is decidedly mature, with 2015 industry growth barely expected to keep pace with inflation at 3 percent, according to Technomic. Executive vice president Darren Tristano says that, despite its nominal growth, pizza has several bright spots. Domino’s broadened its menu while keeping pizza at the core; some brands used discounting to focus on underserved, lower-income markets; and others refocused on quality, like Papa John’s. But the segment to watch, he says, is fast casual.

“The major brands growing in fast-casual pizza were well below $400 million last year in total sales, or about 1 percent, but it’s an important 1 percent,” Tristano says. “It’s a strong indication of where growth and competition will occur, and if you’re the 99 percent, how you need to defend your space.”

The emerging pizza fast casuals are leveraging an integrated approach of preparing the product with the customer in real time by working the cooking element into the back end.

“Subway was really the first to build this quick-serve assembly-line model,” says Rick Wetzel, founder of Pasadena, California–based fast-casual chain Blaze Fast Fire’d Pizza. “Chipotle built on Subway by adding the culinary aspect. We built on Chipotle and evolved it further because that’s what pizza needed to be—hot, fresh, and custom.”

Tristano says this disruptive model enables fast-casual pizza to steal share from other pizza concepts.

But Blaze’s success (the chain reports an average $1.55 million in per-unit sales) is also thanks to a focus on quality, says executive chef Brad Kent. The dough is made with salt, untreated flour, olive oil, and water. Rather than adding chemicals to ensure consistency, Blaze focuses on extensive staff training to accomplish proper mixing and fermentation.

“With the rise of the Internet and food TV, people are starting to question why things like dough conditioners need to be in their pizzas,” Kent says.

Indeed, some legacy brands are struggling to appeal to changing tastes, Tristano says. In an effort to reverse its financial woes, Pizza Hut completed a massive menu overhaul last year, featuring six new sauces, such as crushed tomato and honey sriracha; 10 new crust flavors, including toasted Parmesan and salted pretzel; and 11 new pizza recipes with premium ingredients like Peruvian peppers. The campaign includes new branding and logos, as well as humorous, irreverent ad campaigns aimed at taking pizza where it’s never been before. And yet same-store sales in the U.S., where the new menu was unveiled, have since fallen 3 percent.

But Domino’s turned its biggest setback—its product—into its biggest advantage with the 2009 “Oh Yes We Did” transparency campaign to reformulate its pizza, which helped generate positive same-store sales growth over the ensuing six years, says Tim McIntyre, vice president of communications. Building on increased consumer confidence, the brand unveiled a plan to convert all restaurants into “pizza theaters” by 2017 that would feature visible kitchens, carryout trackers, and even tables for dine-in.

The chain also rolled out new menu items, including pasta and sandwiches, to create a lunch daypart. But Tristano wonders if it will pay off long-term.

“Short-term, menu expansion is a great opportunity to grow sales. Long-term, as consumers think of the Domino’s brand as more than pizza, I’m not sure the quality and their reputation will give them success,” he says, noting that McDonald’s has yet to recover since shifting its focus away from burgers.

Fifty-two-year-old Donatos, which has called itself the first fast-casual pizza brand, has long offered expanded menus of subs, stromboli, salads, and desserts in addition to some 2,600 possible pizza combinations. Higher demand for quality signaled that it was time to revisit the menu and overhaul the salads with new premium offerings, like the Caprese with Roma tomatoes and fresh Mozzarella.

COO Tom Pendrey of the Ohio-based brand is quick to note that these upgrades did not come at the expense of pizza. “Primarily, since the recession, it’s been about check sizes keeping people out of the red. For us, it’s been about transaction growth,” he says of the reason for the upgrades.

Donatos is also investing in precise ordering and delivery systems in the increasingly crowded market. Last January, the chain implemented new online and mobile ordering and customer response systems that have improved chain-wide ordering accuracy to 96 percent.

“We built our systems to help our restaurants be prepared to handle expected demand by day and by shift,” Pendrey says. “We’re now consistently meeting eight-minute order time frames, so we’re able to compete with and improve upon the fast-casual model.”

Domino’s has also made technological innovation a priority, building on the success of its Pizza Tracker app, which tracks pizza orders from oven to doorstep. The chain has since added ordering capabilities via text, smart watch, smart TV, and Twitter. It even launched its own version of iPhone’s Siri: Dom, the first voice app that enables retail transactions. As of year-end 2014, about half of all of sales ($2 billion) now come via digital platforms and a quarter from mobile devices.

“These are the kinds of innovation and investments we can make. We believe smaller companies can’t make those kinds of investments,” McIntyre says.

Pendrey says the advent of third-party delivery services like Postmates—which recently teamed up with Blaze—will likely be a boon to fast-casual brands that lack an internal delivery system. These third-party companies will likely raise the bar on accuracy and convenience, but he cautions that integrating external software with companies’ existing POS systems could prove a Herculean feat.

For now, Blaze remains focused on “the four walls of its restaurant,” Wetzel says. “Delivered pizza is massive in the U.S. If we can do it well, we’re not going to build our own delivery network. If these guys activate, it could be big.”

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