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34 PMQ Magazine The Pizza Industry’s Business Monthly The 2018 Pizza Power Report A State-of-the-Industry Analysis

Embracing speed and technology is the key to toppling the competition in 2018. Just ask Domino’s. By Liz Barrett

his year’s Pizza Power Report practically wrote itself. As we combed through Tthe numbers and reviewed the year’s leading and trailing trends, the same buzzwords and brands kept appearing. It became crystal clear that pizza consumers want their pizza the way they want it and as fast as they can get it. Fast-casual pizza chains like and MOD Pizza showed some of their best unit and sales growth yet, proving that consumers are still yearning for customization and speed in their pizza experience. Domino’s, meanwhile, has blazed new trails with digital technologies that, as we’ll explain later in our report, could soon move the chain into the No. 1 position over .

December 2017 pmq.com 35 2018 QUICK FACTS TRENDS COMPARED TO 2017 PIZZA POWER REPORT

TOP 50 CHAINS WORLDWIDE NO. OF U.S. AVERAGE UNIT PIZZA• MARKET PIZZA• MARKET PIZZERIAS• •SALES $134 BILLION $45.1 BILLION 75,243 $577,909

Source | Euromonitor Source | PMQ Estimate Source | CHD Expert Source | Technomic

FOCUSING ON CONSUMER NEEDS understand consumers’ out-of-home dining behaviors The big winners in the pizza race this past year were those and preferences. The top three attributes that North who embraced websites, social media, online ordering and American respondents listed as reasons for choosing a delivery technology. Many of the fastest-growing pizzerias were Reasonably Priced Food (47%); Food also had the highest web rankings, illustrating that there’s Quality (30%); and Type of Cuisine (25%). a direct correlation between a strong web presence and These insights show us that even pizzerias with fantastic healthy sales. websites, great delivery and perfect social media pages On top of that, consumers are now spending as much can fail if consumers deem them to be too expensive or money eating out as they do eating at home. According provide poor customer service. to a recent study in Consumer Reports, around half of This year’s industry statistics and trends, presented here every food dollar is spent at , equaling roughly in PMQ’s annual Pizza Power Report, will illustrate key $2,222 per person, per year. areas where you can focus your efforts to guarantee future The survey of 68,950 restaurant-goers told Consumer growth within your business. Let the learning begin! Reports that nothing matters more in the choice of a restaurant than the taste and quality of the food. And MAKING HEADLINES while respondents were satisfied with about half of the Never one to shy away from the spotlight, pizza made its restaurants listed in the survey, they did note areas that fair share of headlines in 2017. In February, a social media needed improvement, such as service that was frenzy ensued when the president of Iceland, lacking, restaurants that were too noisy, Gudni Thorlacius Johannesson, joked inattentive waiters, and long waits to with high schoolers that pineapple order and get the check. pizza should be outlawed. Since we’re eating out more In June, a tenacious team of often, we’re also concerned pizzaiolos—led by industry about affordability. The Niel- giants like Giulio Adriani, sen Global Out-of-Home Business Insider named Blaze Pizza as Dining Survey polled more the fastest-growing pizza chain in the than 30,000 online respon- country and pizza itself as the fastest- growing segment of all fast-casual dents in 61 countries to restaurants.

36 PMQ Pizza Magazine The Pizza Industry’s Business Monthly UNITED STATES & PASTA PIZZA VERO PIZZA SALES* $45.1 Billion *PMQ Estimate

Independent | $18.5 Billion 41% Experimenting Top 50 chains | $26.6 Billion 58.9% With Meal Kits PMQ estimate was calculated using The meal kit category has ballooned CHD Expert numbers that track independent pizzerias and Technomic to more than $2 billion, according to numbers that track Top 50 chains. research firm Pentallect, with restau- rants just scratching the surface. Accord- ing to the National Restaurant Association, Tony Gemignani and John Arena—gathered in Los Ange- 49% of consumers said they would buy les to break the Guinness World Record for the world’s meal kits to prepare at home if their favorite longest pizza. restaurant offered them for purchase. Pizza was also unsurprisingly labeled as the fastest- Pentallect’s research showed that, beyond growing segment of fast-casual restaurants in 2017, with enjoying the experience and the unique Blaze Pizza named the fastest-growing restaurant chain items, the main reason consumers use in the country by Business Insider. meal kits was “for convenience” (53%). But just as the industry was celebrating these victories, The main reason others did not use meal it also had obstacles to overcome—as did the rest of the kits was because they “had no real need” hospitality industry. Those obstacles included devastating (42%). Pentallect noted that the reasons hurricanes in , the Gulf Coast and Puerto Rico; fires for not using a meal kit—which also included in ’s Napa and Sonoma counties; and the ongo- factors such as “can get what I need else- ing battle for wage increases across the hospitality sector. where” and “have not thought about it”—can No one can control natural disasters, but we can do our be overcome with creative marketing. part when it comes to wages. “I pay my pizza makers a commission based on the volume we do each night,” says If you’re ready to experiment with meal kits Paul Giannone, founder of Paulie Gee’s in Brooklyn, New in your pizzeria, start small, with just one or York. “It incentivizes them to work harder, and therefore, two of your most popular dishes. Make sure they always make more than minimum wage.” the ingredients can be delivered fresh and Lenny Rago, co-owner of Panino’s Pizza in Chicago, prepared within 30 minutes. Once the kits says operators should not be afraid to raise prices to offset catch on, you can expand the offering. rising wages. “Most consumers will pay for quality,” he says. “You have passion for what you do, and you pick your ingredients to give the customer the best product INCREASED INDEPENDENT CLOSURES possible. Let the customer know that quality can’t be According to CHD Expert, there were 75,243 pizza automated.” restaurants in operation at the end of September 2017. This year’s ups and downs were reflected in an above- A total of 4,992 new pizzerias opened their doors, while average increase in sales, but with most of the gains going 5,291 closed. to chains. Euromonitor reported a North American Independents opened 2,868 stores and closed 4,121, industry increase of 4.58%, with chains seeing growth while chains opened 2,124 and closed 1,170. Last year’s of 5.83%, while independents saw only a 2.65% increase. report showed a net store loss for the independents of only 38 PMQ Pizza Magazine The Pizza Industry’s Business Monthly INDEPENDENT PIZZERIAS VS CHAIN STORES LESS THAN 10 UNITS MORE THAN 10 UNITS

INDEPENDENTS 2,868

OPENINGS CHAINS 2,124

TOTAL PIZZA INDUSTRY 4,992

INDEPENDENTS 4,121

CLOSINGS CHAINS 1,170

TOTAL PIZZA INDUSTRY 5,291

-1,253 +954 -299 NET LOSS INDEPENDENTS CHAINS TOTAL PIZZA INDUSTRY

Source | CHD Expert

42 units, while this year showed 1,253. Overall, however, emotional metrics. Some of the top attributes included the overall net loss of pizzerias for the industry this year being community-oriented, offering personalized service was less than last year, at only 299 units. and sharing the customer’s values. Despite an above-average number of closures from independents, they still account for a higher percentage INTERNATIONAL GROWTH of the total industry, with CHD Expert reporting 41,728 Large pizza chains continued to expand beyond U.S. bor- independents and 33,515 chains. However, per-unit sales ders this year, with a keen focus on nations with rising for chain pizzerias are nearly 70% higher than that of disposable incomes. independents, according to CHD Expert, with chains Pakistan is the world’s fastest-growing retail market, reporting $745,557 per store and independents reporting according to Euromonitor International, with Pizza Hut $443,258 per store. planning to double its store count in Pakistan to 150 over But don’t let per-store sales numbers get you down. the next five years. Almost two-thirds of the 200 million Consumers still often choose independents over chains. people in Pakistan are younger than 30, according to In fact, Chicago-based food industry consulting firm Pen- Bloomberg, with disposable incomes doubling since 2010 tallect, in collaboration with Critical Mix, conducted and 40% of household expenditure spent on food. consumer research that found consumers rated inde- According to a recent article in The New York Times, pendent restaurants as superior to chains in 12 of the many nations view Western foods such as pizza and 15 studied key attributes across both operational and fried chicken as status symbols, furthering the growth of

December 2017 pmq.com 39 $134 BILLION WORLD PIZZA MARKET (2017) CURRENT SALES + 5-YEAR FORECAST

2%

11% Russia | $1.18B 3% 12% Eastern Europe | $3.90B Western Europe | $46.99B North America | $50.07B 28%

China | $3.6B 22% Brown arrows indicate the seven Asia Pacific | $10.85B regions that 15% contribute to the total world pizza Middle East/Africa | $4.79B market of $134 18% billion. 10%

Separate breakouts Latin America | $15.07B for Russian and Australasia | $2.01B Chinese pizza markets. China metrics only include Source | Euromonitor International chain pizzerias at (Including a forecast from 2016-2021) this time. fast-food brands in places such as Ghana, Africa. And Station 4, Amazon Echo and even their car (using Ford’s Euromonitor International showed sales at Middle East Sync service). All in all, Domino’s offers at least 10 ways and Africa pizzerias (chain and independent) growing to order pizza online, including tweeting a pizza emoji from $4.29 billion in 2015 to $4.66 billion in 2016. via Twitter or opening a chat on Facebook Messenger. The company now gets more than 60% of its orders THE DOMINANCE OF DOMINO’S through these various digital platforms. In an October As this month’s PMQ cover illustration suggests, you 12 interview with Jim Cramer on CNBC’s Mad Money, can’t talk about pizza in 2017 without talking about the Doyle said “natural voice” is the next big development in dominance of Domino’s. CEO Patrick Doyle has spear- pizza ordering. “We’ve been talking about natural voice headed an astonishing resurgence in recent years, as the as how we think people are going to interact with tech- chain overhauled its recipe and embraced technology to nology for a while,” he said in the interview. “We started make ordering pizza as easy as pointing a finger. The Los investing in it three or four years ago. We’re seeing that Angeles Times reported in May that Domino’s stock had play out now.” risen 5,000 percent since 2008, with same-store sales in For its AnyWare suite of products, Amazon Echo’s Alexa the United States climbing for 24 straight quarters. As of voice service has been the strongest performer in terms of July, Nation’s Restaurant News noted that Domino’s was total number of orders, Doyle told Cramer. “That keeps “on track to take the pizza segment’s top spot in the near growing. Google Home’s doing well. We’re looking at future,” muscling past longtime No. 1 Pizza Hut. other ways we can use that.” Fast Company named Domino’s one of its Most Innova- But Domino’s isn’t just leading the way in ordering tive Companies of 2017, in part because of its zero-click innovations. The company has also partnered with Ford ordering app that, when opened, automatically sends in to test autonomous delivery vehicles. A specially designed the customer’s preloaded preferred order after a 10-second Ford Fusion sedan, which Domino’s has tried out with countdown, not to mention its cloud-based AnyWare app randomly selected customers in Ann Arbor, , that lets users order from their Samsung Smart TV, Play- boasts self-driving technology as well as an actual oven.

40 PMQ Pizza Magazine The Pizza Industry’s Business Monthly B Y ANNUAL RANK BY CATEGORY TOP 50 PIZZA CHAINS SALES AVERAGE 2016 2015 SALES AVERAGE 2016 U.S. 2015 U.S. SALES 2016 2015 UNITS SALES AVERAGE AVERAGE PER UNIT SALES UNITS SALES SALES SALES CHANGE U.S. U.S. CHANGE PER CHAIN NAME SALES PER SALES PER CHANGE CHANGE (X 1,000) (X 1,000) (%) UNITS UNITS (%) UNIT UNIT UNIT (%)

1 1 33 36 Pizza Hut $5,751,381 $5,703,770 0.83% 7,689 7,822 -1.70% $748,001 $729,196 2.58% 2 2 19 11 Domino's $5,479,000 $4,800,000 14.15% 5,371 5,200 3.29% $1,020,108 $923,077 10.51% 3 3 27 16 $3,800,000 $3,525,000 7.80% 4,388 4,256 3.10% $865,998 $828,242 4.56% 4 4 26 25 Papa John's $2,931,550 $2,811,350 4.28% 3,331 3,290 1.25% $880,081 $854,514 2.99% 5 5 44 37 Papa Murphy's Pizza $884,780 $880,429 0.49% 1,537 1,496 2.74% $575,654 $588,522 -2.19% 6 15 1 28 $762,500 $737,600 3.38% 232 228 1.75% $3,286,638 $3,235,088 1.59% 7 6 39 8 Marco's Pizza $488,900 $418,000 16.96% 770 667 15.44% $634,935 $626,687 1.32% 8 12 18 24 $442,558 $424,107 4.35% 433 437 -0.92% $1,022,074 $970,497 5.31% 9 20 4 14 $433,600 $398,400 8.84% 192 181 6.08% $2,258,333 $2,201,105 2.60% 10 11 21 39 $417,000 $422,100 -1.21% 440 445 -1.12% $947,727 $948,539 -0.09% 11 8 32 29 Chuck E. Cheese's $404,400 $392,000 3.16% 540 553 -2.35% $748,889 $708,861 5.65% 12 7 37 17 Hungry Howie's Pizza $378,222 $352,268 7.37% 548 548 0.00% $690,186 $642,825 7.37%

13 13 24 15 Jet's Pizza $368,400 $339,500 8.51% 404 384 5.21% $911,881 $884,115 3.14%

14 10 43 47 Godfather's Pizza $269,400 $299,200 -9.96% 448 551 -18.69% $601,339 $543,013 10.74% 15 18 12 34 $231,791 $228,646 1.38% 199 192 3.65% $1,164,779 $1,190,865 -2.19% 16 14 40 48 $190,000 $212,600 -10.63% 305 333 -8.41% $622,951 $638,438 -2.43% 17 26 11 27 $189,900 $183,600 3.43% 157 153 2.61% $1,209,554 $1,200,000 0.80% 18 24 15 3 Blaze Pizza $184,500 $101,300 82.13% 169 104 62.50% $1,091,716 $974,038 12.08% 19 38 5 43 Bertucci's $184,200 $191,800 -3.96% 83 86 -3.49% $2,219,277 $2,230,233 -0.49% 20 21 30 1 MOD Pizza $149,800 $65,200 129.75% 187 92 103.26% $801,070 $708,696 13.03% 21 41 3 33 LaRosa's Pizzeria $149,403 $145,505 2.68% 65 66 -1.52% $2,298,508 $2,204,621 4.26% 22 9 50 30 Pizza Pro $139,500 $135,300 3.10% 468 462 1.30% $298,077 $292,857 1.78% 23 27 28 46 Papa Gino's Pizzeria $132,900 $144,680 -8.14% 155 163 -4.91% $857,419 $887,607 -3.40% 24 22 34 19 Mountain Mike's Pizza $130,700 $122,054 7.08% 180 164 9.76% $726,111 $744,232 -2.43% 25 17 45 26 Villa Fresh Italian Kitchen $126,000 $120,900 4.22% 220 218 0.92% $572,727 $554,587 3.27% 26 19 38 20 Rosati's Pizza $125,100 $118,100 5.93% 195 190 2.63% $641,538 $621,579 3.21% 27 44 7 9 Anthony's Coal Fired Pizza $123,100 $105,500 16.68% 62 52 19.23% $1,985,484 $2,028,846 -2.14% 28 29 22 41 Mazzio's Italian Eatery $121,600 $124,600 -2.41% 130 133 -2.26% $935,385 $936,842 -0.16% 29 35 10 31 Gatti's Pizza $121,000 $117,500 2.98% 89 84 5.95% $1,359,551 $1,398,810 -2.81% 30 16 48 44 Fox's Pizza Den $119,200 $124,200 -4.03% 230 242 -4.96% $518,261 $513,223 0.98% 31 32 14 23 $115,000 $109,978 4.57% 101 99 2.02% $1,138,614 $1,110,889 2.50% 32 43 9 6 Giordano's $99,100 $81,800 21.15% 63 55 14.55% $1,573,016 $1,487,273 5.77% 33 28 36 5 Pizzeria $93,400 $74,610 25.18% 131 78 67.95% $712,977 $956,538 -25.46% 34 25 46 45 $88,662 $92,951 -4.61% 162 179 -9.50% $547,296 $519,279 5.40% 35 45 8 21 Shakey's Pizza Parlor $87,300 $83,200 4.93% 53 51 3.92% $1,647,170 $1,631,373 0.97% 36 33 31 22 Imo's Pizza $75,200 $71,900 4.59% 98 96 2.08% $767,347 $748,958 2.46% 37 50 2 12 Dion's Pizza $70,900 $62,300 13.80% 23 21 9.52% $3,082,609 $2,966,667 3.91% 38 34 35 18 $70,600 $65,800 7.29% 98 94 4.26% $720,408 $700,000 2.92% 39 37 29 7 Toppers Pizza $70,300 $59,778 17.60% 85 73 16.44% $827,059 $818,877 1.00% 40 39 25 50 Famous Famiglia $69,300 $78,200 -11.38% 77 85 -9.41% $900,000 $920,000 -2.17% 41 49 6 10 Brixx Wood Fired Pizza $67,600 $58,800 14.97% 32 30 6.67% $2,112,500 $1,960,000 7.78% 42 30 41 13 $67,564 $60,750 11.22% 109 111 -1.80% $619,853 $547,297 13.26% 43 42 17 32 Monical's Pizza $66,700 $64,942 2.71% 64 63 1.59% $1,042,188 $1,030,825 1.10% 44 40 23 42 Happy's Pizza $63,900 $65,600 -2.59% 70 73 -4.11% $912,857 $898,630 1.58% 45 31 47 40 Giovanni's Pizza $56,400 $57,200 -1.40% 104 105 -0.95% $542,308 $544,762 -0.45% 46 23 49 38 Simple Simon's Pizza $53,700 $53,600 0.19% 180 184 -2.17% $298,333 $291,304 2.41% 47 46 16 49 Me-N-Ed's Pizzeria $53,600 $60,400 -11.26% 50 55 -9.09% $1,072,000 $1,098,182 -2.38% 48 36 42 2 Pizza Co. $53,310 $25,338 110.40% 88 54 62.96% $605,795 $469,222 29.11% 49 48 13 4 PizzaRev $50,400 $33,200 51.81% 44 32 37.50% $1,145,455 $1,037,500 10.41% 50 47 20 35 Sarpino's Pizzeria $47,468 $47,006 0.98% 50 49 2.04% $949,360 $959,306 -1.04%

SOURCE: TECHNOMIC BASED ON 2016 SALES December 2017 pmq.com 41 INDEPENDENT PIZZERIAS VS CHAIN STORES LESS THAN 10 UNITS MORE THAN 10 UNITS

SALES TOTAL INDEPENDENTS $18,496,263,682.65 $43.48 BILLION CHAINS $24,987,354,031.74

TOTAL UNITS INDEPENDENTS 41,728 75,243 CHAINS 33,515

AVG. SALES INDEPENDENTS $443,257.85 $577,909.14 CHAINS $745,557.33

OCT 2016 - SEPT 2017 Source | CHD Expert

To get their , customers must meet the car outside areas. “We have an extensive vegan menu at all of our their homes and enter a number on the car’s automated locations,” says Giannone. “We have housemade vegan keypad—it’s a delivery without any human interaction. sausage, cashew ricotta and jackfruit meatballs, and we And that’s the real test, company president Russell Weiner use vegan cheese.” has said. “How will customers react to coming outside Giannone and Rago both report a boom in - to get their food? We need to make sure the interface is style pizza, while Jason Johnston, executive chef of clear and simple.” National Harbor in Oxon Hill, , says he’s notic- Even if self-driving delivery cars don’t catch on right ing a focus on the pizza process more than any particular away, there’s little doubt that Domino’s will continue to style. “It feels like people are moving away from drawing assert its dominance in the pizza chain segment through pizza lines in the sand,” he says. “The trend is moving cutting-edge technology and e-commerce. But don’t count toward the guest looking for operators and chefs to own Pizza Hut out just yet. Chris Dargis, chief e-commerce the genre they specialize in by being true to every aspect officer for Pizza Hut U.S., has roughly doubled his tech of the process.” department since November 2016 and ramped up the Johnston says that this is achieved by honoring the chain’s own digital ordering systems to keep pace with dough making process for a particular pizza style, having Domino’s. “Pizza Hut understands that digital, especially the right oven, cooking at the right temperature, and mobile, is where consumers are, and we want to step up the delivering a stellar product to the guest. “All of these ele- game around that,” Dargis told DigiDay.com in August. ments show that we respect the guest and we understand that we owe them that great, authentic pizza experience MENU MATTERS in our pizza genre specialty,” he says. Pizza menus saw some action this year as charcoal, uni- corn and cauliflower crust pizzas blew up on Instagram; EXPANDED TOPPING CHOICES Detroit-style pizza finally got its moment in the spotlight; Build-your-own fast-casual concepts have made it easy and gluten-free and vegan slices edged their way into more for consumers to go beyond . Pineapple and

42 PMQ Pizza Magazine The Pizza Industry’s Business Monthly STORES PER STATE STORES POPULATION 10,000 PEOPLE New Hampshire 473 1,320,720 3.58 TOP PIZZERIA STATES 1080 3,074,190 3.51 BY STORES PER CAPITA Pennsylvania 4483 12,763,540 3.51 ABOVE AVERAGE Massachusetts 2324 6,646,140 3.50

Connecticut 1240 3,590,350 3.45

Rhode Island 358 1,050,290 3.41

New Jersey 2983 8,864,590 3.37

Delaware 303 917,090 3.30

Ohio 3771 11,544,230 3.27

West 557 1,855,410 3.00

New York 5845 19,570,260 2.99

Indiana 1941 6,537,330 2.97

Michigan 2763 9,883,360 2.80

North Dakota 195 699,630 2.79

South Dakota 223 833,350 2.68

Vermont 167 626,010 2.67

Maine 346 1,329,190 2.60

Montana 252 1,005,140 2.51

Missouri 1506 6,021,990 2.50 SOURCE: CHD Expert Year Ending: Sept 2017 1090 4,380,420 2.49

Kansas 714 2,885,910 2.47 AVERAGE 3158 12,875,260 2.45 chicken may still be considered “adventurous” choices by tradi- D.C. 149 618,000 2.41 tionalists, but dozens of new ingredient options have emerged 4642 19,317,570 2.40 along the flavor spectrum. 1286 5,379,140 2.39 “I like to contrast sweet and savory when I’m coming up 701 2,949,130 2.38 with a new pie,” says Giannone. “Our Monte Cristo pie, with 654 2,758,930 2.37

Maryland 1387 5,884,560 2.36 mild Gouda, Canadian bacon and a maple syrup drizzle, is

Nebraska 427 1,855,530 2.30 just one example.”

Wyoming 129 576,410 2.24 “Pizza is, and has always been, an ever-evolving cuisine,

Idaho 356 1,595,730 2.23 especially when it comes to toppings,” says Joseph Englese, 867 3,899,350 2.22 executive chef of National Market at MGM National Harbor 844 3,814,820 2.21 in Oxon Hill, Maryland, which includes ZiZi’s Pizza. “One of Virginia 1792 8,185,870 2.19 the more interesting things that we have noticed with millen-

Wisconsin 1248 5,726,400 2.18 nials is their love for ranch dressing and incorporating it into

North Carolina 2099 9,752,070 2.15 everything they eat, including pizza. At ZiZi’s, we experiment

Colorado 1115 5,187,580 2.15 with a variety of toppings, like pineapple, clams and chicken, Tennessee 1367 6,456,240 2.12 offering our patrons a chance to expand their palates, but we

BELOW AVERAGE 982 4,723,720 2.08 also maintain a constant presence of the traditional styles.” 146 731,450 2.00 As Englese notes, it’s important to incorporate new ingre- Washington 1316 6,897,010 1.91 dients while also maintaining tradition, which is reinforced Utah 538 2,855,290 1.88 in the most recent findings from Technomic’s 2017 Flavor Texas 4900 26,059,200 1.88 Consumer Trend Report. Results showed millennials were twice California 7101 38,041,430 1.87 as likely as baby boomers to order ethnic foods at least once a 1197 6,553,260 1.83 week, while boomers are staying in their comfort zone more 533 2,984,930 1.79 than ever. The study did show, however, that there remains a Georgia 1745 9,919,950 1.76 desire for unique offerings, with 42% of the 1,500 respondents New Mexico 340 2,085,540 1.63 saying they expect restaurants to offer signature flavors they Alabama 767 4,822,020 1.59 can’t get elsewhere. Louisiana 696 4,601,890 1.51

Hawaii 147 1,392,310 1.06 Organic, locally-sourced Customization and ingredients are a big priority Speed Are Key with today’s health-conscious Beyond technology’s presence in every pizza consumers. aspect of the pizza industry, two of the biggest takeaways from this year’s Pizza LOCAL AND ORGANIC Power Report are the increasing desire for customization and the need for faster Consumers may be getting more adventurous in their delivery. topping and crust choices, but many are also nursing long-standing and new allergies, which leads them to The more you can meet these metrics, request more locally sourced and sustainable ingredients. the more loyalty you’ll be able to build, The Nielsen Global Health and Ingredient Sentiment according to Brand Keys in New York, Survey polled more than 30,000 online respondents in which studies customer loyalty engage- 63 countries to understand how consumers feel about ment and recently ranked Domino’s, Papa the foods and beverages available on store shelves. In it, Murphy’s and Papa John’s as the pizza 31% of respondents from North America said they or leaders in Customer Loyalty Engagement. someone in their household suffers from a food allergy Robert Passikoff, Brand Keys founder and or intolerance. president, says, “The big driver of loyalty is We’ve already seen some of the big chains, such as Pizza taste and something that’s morphed into Hut and Papa John’s, eliminate ingredients such as artifi- what we call ‘made-to-order’ taste. Con- cial colors, sweeteners and preservatives. This past April, sumers are looking for real quality in their Papa John’s launched a pilot program to introduce organic pizzas and love the idea of customizing ingredients at select locations. what they really want. “As the general public becomes more knowledgeable about food and food preparation, they will naturally be “What’s gaining real momentum in creat- interested in where the food comes from,” says Derrick ing loyalty is speed of delivery and ‘order Tung, owner of Paulie Gee’s Logan Square in Chicago. options,’” Passikoff adds. “Based on the “We do our best to focus on clean and local ingredients, consumption numbers, Americans can’t but just as important, the quality of ingredients must be get their pizzas fast enough. According to excellent, along with a price point that makes sense for our our expert loyalist consumers, there’s room model. If not, it doesn’t make sense to use the ingredient for improvement in the delivery area, some- over the long term.” thing the national chains don’t have an When it comes to sourcing local, Giannone says he exclusive on.” focuses his efforts on helping local businesses more than

46 PMQ Pizza Magazine The Pizza Industry’s Business Monthly FAST-CASUAL CHAIN GROWTH 2015-2016 SALES GROWTH UNIT GROWTH Source | Technomic

130%

110% 103%

82% 68% 63% 63% 52% 38% 25%

specific ingredients. “We try to support local artisans that when given the extra time, new research shows that post- make products such as honey, ice cream, bakery goods, ing calories, whether or not it’s required by law, could and other items that can help their businesses,” he says. actually increase your customer count. Not everyone thinks local sourcing is such a big deal. One study, “The Effect of Calorie Posting Regula- Sometimes, what really matters is delivering on customer tion on Consumer Opinion,” was co-authored by data expectations, Rago notes. “I don’t know if local ingredi- researchers from the University of Southern California, ents make a big difference, as long as you use a decent the National University of Singapore, and Cornell Uni- product that the consumer likes,” he says. versity. They analyzed 761,962 restaurant reviews across But Johnston says if you’re asking customers to pay a 9,805 restaurants in New York City from 2004 to 2012. premium, you should be providing a premium product. The authors found a significant increase in the proportion “Being locally sourced is always a focal point for cooks, of reviews that discussed health for chain restaurants, chefs and pizzaioli,” he says. “This is extremely important relative to nonchain restaurants. for VPN and American artisan styles, where we’re asking Additionally, in a Mintel survey of 1,799 internet users the guest to pay up to $20 or more for a 10” pizza. It’s who have visited a pizzeria in the last three months, 41% our responsibility to be giving the best, most seasonal said they would like to see healthier side items offered; ingredients to our guests.” 36% were interested in whole-grain pizza crust; and 31% showed an interest in organic ingredients. NUTRITION LABELING The saga continues: In May 2017, the FDA extended the SMARTER ORDERING compliance date for menu labeling requirements from Remember when the phone would ring, you’d pick it up, May 5, 2017, to May 7, 2018, allowing extra time to and someone would ask for a pizza? consider the costs and flexibility of the requirements. Hard to believe that was only a few years ago. Now it While many pizzeria operators breathed a sigh of relief seems like consumers will go out of their way just to avoid

48 PMQ Pizza Magazine The Pizza Industry’s Business Monthly PMQ TOP 20 CHAINS

Highest Volume per Unit Fastest-Growing per Unit Sales Highest Web Rank

1. California Pizza Kitchen 1. Pie Five Pizza Co. 1. Domino’s 2. Dion’s Pizza 2. Pizza Factory 2. Papa John’s 3. LaRosa’s Pizzeria 3. MOD Pizza 3. Pizza Hut 4. Mellow Mushroom 4. Blaze Pizza 4. Papa Murphy’s Pizza 5. Bertucci’s 5. Godfather’s Pizza 5. Marco’s Pizza 6. Brixx Wood Fired Pizza 6. Domino’s 6. Little Caesars 7. Anthony’s Coal Fired Pizza 7. PizzaRev 7. Jet’s Pizza 8. Shakey’s Pizza Parlor 8. Brixx Wood Fired Pizza 8. Hungry Howie’s Pizza 9. Giordano’s 9. Hungry Howie’s Pizza 9. Round Table Pizza 10. Wolfgang Puck Express 10. Giordano’s 10. Chuck E. Cheese’s 11. Gatti’s Pizza 11. Chuck E. Cheese’s 11. Blaze Pizza 12. Donatos Pizza 12. Pizza Inn 12. Toppers Pizza 13. Pizza Ranch TOP 13. Round Table Pizza 13. MOD Pizza 14. PizzaRev 14. Little Caesars 14. Donatos Pizza 15. Ledo Pizza 20 15. LaRosa’s Pizzeria 15. California Pizza Kitchen 16. Blaze Pizza 16. Dion’s Pizza 16. LaRosa’s Pizzeria 17. Me-N-Ed’s Pizzeria 17. Villa Fresh Italian Kitchen 17. Giordano’s 18. Monical’s Pizza 18. Rosati’s Pizza 18. Mellow Mushroom 19. Lou Malnati’s 19. Jet’s Pizza 19. Mountain Mike’s Pizza 20. Round Table Pizza 20. Papa John’s 20. Cicis

SOURCE: Compiled by PMQ using data from Technomic and Alexa. talking to you. Some will avoid your pizzeria altogether PMQ’s 2018 Pizza Industry Census revealed that 58% if they find out that calling is the only way to order a of operators currently offer online ordering, owing 5% to pizza. And, with online ordering, consumers now have the 15% of their sales to the added feature. option of ordering through a pizzeria’s website, a smart- Before you write off online ordering as a delivery-only phone app, social media, with the help of a chat bot, or feature, about 40% of the order volume on Slice is for through a third-party website. pickup and takeout, according to the online ordering EMarketer reports that 69% of internet users have company. More than delivery, online and mobile ordering ordered food delivery online within the past year, and is about providing convenience, accessibility and informa- large pizza chains—like the aforementioned Domino’s tion to customers, whether they want to order for pickup, and Pizza Hut—are looking more like tech companies as delivery, or dine-in. they continue to dazzle customers with digital marketing and robotics. DELIVERING FASTER Meanwhile, some independent pizzerias that fought The introduction of third-party delivery companies has against online ordering are now taking a second look. been a boon for struggling pizzeria operators who have Many have found that declining sales got a hefty boost been dealing with rising wages and turnover rates. But after adding online ordering. many have realized there’s no substitute for in-house deliv- All businesses, not just pizzerias, are looking at the big ery, especially if you’ve already been handling it success- chains for their ability to take a consumer from online fully for years. When using third-party delivery partners, advertisement to order in a matter of clicks. Like Dom- it’s vital to understand how well your food travels—along ino’s, Papa John’s now reports that digital orders make with a host of other considerations. up more than 60% of its sales, while they account for In the survey by AlixPartners, among those who order about half of Pizza Hut’s delivery and carryout business. delivery, 71% said they prefer to get delivery directly from Numbers like that are hard to ignore. the restaurant, while only 8% said they prefer it through

50 PMQ Pizza Magazine The Pizza Industry’s Business Monthly Don’t dismiss the effectiveness of a good customer loyalty program. According to a recent study by Mintel, customers are more likely to recommend premium pizza, such as California Pizza Kitchen or Blaze, to friends. a third-party intermediary. There are also fees associated Kitchen and Blaze Pizza, to their friends. However, larger with third-party delivery that may not be worth it if you chains, with more locations, are visited more often than already have in-house delivery drivers on the payroll. smaller brands due to their availability and convenience. Meanwhile, large companies continue to experiment with drones and robots that may eliminate the need SOCIAL MEDIA for delivery drivers—both in-house and third-party— Boston-based Toast polled 450 restaurateurs in 2017 and altogether. found that, while 74% were using Facebook for their business, more than half of those surveyed do not use BUILDING LOYALTY YouTube, LinkedIn or Snapchat, nor did they intend to Loyalty has been the buzzword this past year, with numer- in 2017. However, YouTube did show the most growth ous studies and lists calling out the loyalty leaders in every potential, with 28% of respondents reporting an inten- industry from restaurants to cosmetics. Not surprisingly, tion to begin using YouTube. pizza ranked high in the loyalty category, with chains such Pizzerias that have even one video on YouTube can as Domino’s, Pizza Hut and Papa John’s right at the top. claim their pizzeria’s channel on PizzaTV (register.pizzatv. In the past, independent operators have dismissed loy- com/join), helping to bring more exposure to their store alty programs as flash-in-the-pan money and time wasters, through regional and independent promotions. but many are coming around to the fact that loyalty is In PMQ’s 2018 Pizza Industry Census, pizzeria oper- one of the top factors helping the chains around them ators reported their top three social media outlets were grow by leaps and bounds. Facebook (81%), Twitter (35%) and Instagram (41%). Loyalty goes beyond a stamp card. With the help of According to Toast’s survey, restaurateurs are now spend- POS machines, brands can track when a customer orders, ing the majority of their advertising dollars on social media what he orders, and when he’s likely to order again. Some ads, whereas in the past, marketing dollars were allocated brands even use games, a tactic referred to as gamification, to charity sponsorships and newspaper ads. While 47% to encourage customers to play along and earn points of fast-casual concepts said they would increase their ad toward food and drink rewards. spend in 2017, the same Toast survey showed that 21% Loyalty doesn’t always equal visits, however, as illus- of pizzerias planned to decrease their ad spend—a greater trated in a recent study by Mintel. Consumers don’t have decrease than any other type of restaurant concept. a strong loyalty to one chain over another, the study con- Ads and social media are just part of the equation. cluded, and, when given the choice, they’d actually rec- Online reviews are also an important factor affecting if ommend more premium pizza, such as California Pizza and why consumers frequent your pizzeria. Only 9% of

December 2017 pmq.com 51 consumers do not read online reviews, according to a 2016 Local Consumer Review Survey conducted by BrightLocal. The research found that the top three ways consumers reviewed or recom- mended a local business were via word of mouth (68%), Facebook (47%) and Google (25%). Of the 1,062 survey respondents, 58% look at overall star rating when judging reviews, 59% look at two to three review sites before making a decision, and seven out of 10 said they would leave a review if they were asked. You can encourage reviews on your own pizzeria by placing reminders on checks, with tabletop signage and through thank- you emails. Creating a link to various review sites on your website is also a great way to boost your reviews. Need another reason to encourage reviews? Many online review readers will sort businesses by “highest rated” or “most reviewed,” meaning yours will fall to the bottom of the list if it has only a few reviews.

STAFFING Employee turnover rates remained highest for the hospitality industry this year, leading some, most notably Zume Pizza in Mountain View, California, to explore introducing robots into the pizzeria kitchen. Similarly, RoDyMan (short for Robotic Dynamic Manipula- tion) is a robot that attempts to mimic a human chef who stretches and tosses pizza dough. The project has been going on for five years and is scheduled to debut at the Naples Pizza Festival in May 2018. Famed pizzaiolo Enzo Coccia was recruited to help in the robotic programming by wearing a sensor-tracking suit that follows his pizza making movements. In PMQ’s 2018 Pizza Industry Census, 46% of respondents said they would be interested in exploring robotics or automatic machinery in their kitchens. It doesn’t have to come down to robots, however. Operators acknowledge that hiring and keeping employees is tough but not impossible. “I hire people at an entry level,” says Giannone. “I don’t hire a dishwasher who wants to be a dishwasher. I hire a dishwasher who wants to be a pizza maker. They end up working harder because they want to move up to being a pizza maker.” Above all else in 2018, look at improving the speed of your processes. Whether that means faster delivery, more people answer- ing the phones, or shorter wait times for food coming out of the kitchen, get food out fast and hot. If you haven’t explored online ordering, social media or delivery yet, this may be the year to start experimenting, either in-house or through a third-party provider. Be a pizza success, not a statistic. Liz Barrett is PMQ’s editor at large and author of Pizza: A Slice of American History. Heather Wilson, Rick Hynum and Steve Green also contributed to this report.