The 2014 Pizza Power Report
Loaded with facts and figures and spotlighting the hottest pizza trends, PMQ’s state-of-the-industry report provides an in-depth survey of the wide world of pizza.
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There’s an invasion under way in the pizza industry. Everyone from baristas to burger chefs, it seems, wants a slice of the action. The founders of Wetzel’s Pretzels, for example, put their own twist on pizza last year with Blaze Pizza (blazepizza.com), while Chili’s Grill & Bar rolled out a line of pies and flatbreads in early 2013. Smashburger founders Tom Ryan and Rick Schaden launched Live Basil Pizza (livebasilpizza.com) in Denver earlier this year. And leading the offensive were Scott and Ally Svenson, who co-founded Seattle-based MOD Pizza (modpizza.com) in 2008 after making their fortune with Seattle Coffee Company in the United Kingdom.
For independent operators, all of these big names—and the big bucks they attract—add up to stiffer competition at the higher end of the market. But this trend also reveals something about consumers’ tastes—more discerning, increasingly sophisticated, and, yes, a little pricier than you might expect. People still like inexpensive, quick-service pizza, and they still enjoy the upscale “slow food” experience, but there’s an in-between niche—called “fast casual”—that’s ripe for exploitation. Where do you fit in?
By reviewing the past year’s overall numbers and examining the trends in some detail, the Pizza Power Report has been designed to help you plan for a more profitable 2014. We’ve culled data from a range of key industry sources, including CHD Expert, Technomic, Mintel, the National Restaurant Association (NRA), Euromonitor and RestaurantData.com. Let’s get started!
THE HEALTHCARE CHALLENGE
Like it or not, the Affordable Care Act keeps moving forward, but its full impact on restaurants remains unclear. The White House in July delayed the employer mandate—which requires large employers to provide healthcare coverage to workers or pay a penalty—by a year, allowing businesses additional time to prepare for it.
Once the employer mandate kicks in, restaurants that average 50-plus “full-time-equivalent” employees will be considered “large employers” and must offer healthcare plans to those employees or face penalties. Companies with fewer than 50 full-time employees won’t have to offer the benefits or pay penalties, but other parts of the law still apply. For example, existing healthcare plans must comply with new ACA regulations, and all employers covered by the Fair Labor Standards Act must provide written notice to their employees about government-run marketplaces.
Regardless of their size, operators will need to familiarize themselves with the details of the law, including its definition of full-time employment and how to determine the status of seasonal employees or those with varying hours. They should be prepared to fulfill the law’s requirement for tracking and reporting employee data. And they’ll have to make sure they know what constitutes an “affordable” healthcare plan and what could trigger a penalty.
It has been particularly difficult this year to estimate the pizza industry’s growth because our sources have not been unanimous in their analyses. But after weighing a wide range of factors, PMQ is predicting a modest increase of 1.16% in overall pizza restaurant sales for 2013. Bear with us for a moment, and we’ll explain how we arrived at that figure.
Technomic’s figures indicate a sales increase of 4.75% for the Top 50 pizza chains for 2012. CHD Expert, on the other hand, showed a 2.4% decline in total pizza restaurant sales for the year ending October 1, 2013. Also weighing in on the subject was Euromonitor, which predicts a 4.04% increase in pizza sales in North America (including Canada) for 2013. PMQ also took into consideration CHD Expert’s report on the rate of pizza store openings and closings between October 2012 and September 2013. In the latter case, we have reasoned that there was not a substantial difference between the open/close rates of independent pizzerias vs. chain pizza stores for that period of time—both chains and independents added and lost stores at a roughly equivalent proportion. Finally, we also factored in data submitted by industry researcher Keith Gellman from RestaurantData.com. His research shows that, as of November 1, 2013, there had been a record number of pizzeria openings. Additionally, Gellman’s data shows that pizza store openings have increased by an average of 13% per year since 2011. Gellman also estimates that nearly 10% of all restaurant openings are now pizza concepts.
With these positive projections in mind and since the increase in the Top 50 chain sales would strongly suggest a roughly equal increase in independent sales, the staff at PMQ is splitting the difference between the reports of CHD Expert and Technomic, thus arriving at our prediction that, when all the numbers come in, total pizza industry sales in 2013 will have grown by 1.16% compared to 2012.