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Pizza-starved Canadians enduring a six-month winter have developed a one-word mantra: delivery. Of all the billions of pizzas delivered each year, Pizza 73 of Edmonton, Alberta, has been one of the most enduring chains in the vast provinces of western Canada. Starting in 1985, partners Guy Goodwin, president, and Dale Moran, vice president, began with one store in Edmonton and 20 years later have methodically expanded to 44 stores with expected 2006 sales of $50 million.
“There weren’t a lot of major players out here when we started,” says Dale Moran, V.P. of Operations with Pizza 73. “No Dominos, maybe three Pizza Huts. We did all the hand-fliers. We handled all the calls through a three-seat call center. We’re up to 80 seats now.”
The call center serves all 40 stores. The customer calls a local number and the charge is forwarded to Pizza 73. In a savvy marketing ploy, the company seeks alliteration with their name. In Edmonton they’re 473-7373, in Calgary, 273-7373.
Slow but sure
Pizza 73 has managed its growth by sticking to its game plan – slow but sure.
“When we first started, the cost of the long distance calls for delivery was somewhere between 65 cents and a dollar. Those calls probably cost now in the range of three to seven cents thanks to advances in tele-communications,” Dale said. He points out the company also employs a “three and out” policy on delivery customers who try to de-fraud their drivers.
“It’s probably only 2 percent of our customers but we put a star by their name when we know it’s a bogus complaint. After the third one the joint partner can refuse delivery.”
Dale says the company holds the line at spending only 8 percent of its operating budget on advertising but has found marketing success with a wide range of media.
“In our early years with budget limitations, we lived on flyers,” he recalls. “Once we got enough mass in market, where we could go on radio, we found that to be tremendously effective for us. We still believe heavily in flyers in the newspaper. We’re extremely heavy on the radio; we do a lot of billboard advertising. We run two television campaigns, covering roughly four months out of the year. The more sales we get, the more advertising dollars we have, the more advertising dollars we have, the more we can market, the more we can market, hopefully we’ve created a snowball. There’s some days we’re tempted to say, gee, we could cut back one or two percent, but we’ve basically bought into keeping our advertising budget where it is.”
By the numbers
Rather than franchisees, Pizza 73 offers ownership of each of its 1,200 sq. ft. stores, with no royalty rate. With $50 million sales spread over 40 stores, that’s $1.5 million per unit. Weekly orders number around 45,000.
“We’re probably more than twice the national average on per unit,” Dale says. “We’re running food cost at roughly 37 percent, labor at 16 percent.” At this rate, each store has recorded a robust 15 to 20 percent sales increase the last few years. Another key aspect in the equation to be factored in: Pizza 73 offers a true two-for-one, buy one, and get one free. The chain also has to deal with Canadian pricing regulations.
“The two-for-one is obviously impacting our costing numbers,” Dale explains. “We also sell a lot of chicken wings with our products, which has a higher food cost base. In Canada, we’ve got some supply side marketing that controls the price of dairy as well as poultry. It’s not really a free market like it is in the States where there’s competition. There may be some market discounts for larger players but they’ll be minimized in the marketplace. Basically, the government is working along with the dairy farmers and will come up with pricing, a new price for the year, which, by the way, never goes down. In a sense it’s a level playing field, but we’re probably paying approximately two times the price of cheese in Canada as you do in the States. Probably the same for poultry.”
The company further offsets their food costs (40 percent of all orders include wings) with volume and the lower labor figure. The company also has raised their delivery charge to $3, with that money going to their drivers.
“We got no resistance on that,” Dale reflects. “In fact we found that as the delivery charge increased, so did the tips. We found that it might even push somebody to be more of a pick-up customer.”
Each store deploys ten staffers with as many drivers. Dale says in their early days, the winter months predominated sales but through various promotions, the numbers “have leveled. Now we don’t have one month that exceeds another by more than about 15 percent.”
Dale says that in most of the cities where they have stores, Pizza 73 can track their deliveries and he calculates the company delivers 45 to 70 percent of the households in each one of store’s territories.
“We’re penetrating well. Now we get some of that growth from repeat customers. As they have more money – Alberta is an oil province – we’ve seen it rise. After that 70 percent number, if there are no new customers coming into that store’s territory so to speak, we’re only going to grow by average check sizes or by frequency of customer. That customer frequency has been part of that growth for the last two years.”
Another key feature of the chain’s steady expansion is not to rush into an area without proper planning, research and diligence.
“We try not to look out further than the next three to five years because there is so much change,” Dale declares.
“There have obviously been some locations we could probably go into but we’ve been leery. We’re pretty tight in our head office. If we wanted to really accelerate our growth we’d have to bring in more people to do that. I think in the next two or three years after we saturate this marketplace, we’ll have to step out. Canada has some big empty spaces between major cities, so we’re talking about going 1,000 miles away which will be Vancouver or B.C. We’ll take some time and thought before we go into there.”
Elbow greases profits
Perhaps the biggest reason for the success of Pizza 73 is just good old-fashioned hard work. Gary Grewel of Edmonton, is one of Pizza 73’s longest-operating joint venture partners starting with the company in 1990. He likes the joint venture arrangement in which the company deals with paperwork and advertising and leaves him to do what he does best: work his fingers to the bone.
“We’re open from 11AM until 4AM on weekends,” he says from his busy store located on White Street, a popular hangout for young people. He says his demographic is heavily slanted to young males aged 18-25.
“I’ve had Friday nights where we did over a thousand orders,” he says, noting his store’s weekly take of $36,000. Gary has reliable help from his two sons and wife but he still routinely puts in 14-hour days.
“I put on eight people for busy nights and nine drivers. With the three dollar delivery charge the drivers can take home $250- 300 a night. Sometimes they make more than me,” he chuckles.
Gary says the formula is simple, hard work and basic pizza staples. His bestsellers are a Pepperoni-mushroom pizza and Hawaiian pizza, and of course wings, wings, wings.
“We’ve gone through 150 cases of wings in a night, that’s 400 pounds,” he marvels. Gary says special events like an annual heritage hockey game featuring Wayne Gretsky spikes his sales.
Growth Back Mountain
To sustain their momentum in the short term, Pizza 73 continues its steady innovations.
“We’re launching a new product we’re calling the Wedgie,” Dale says. This is a small pizza-like item sliced into smaller wedges with kind of garlicy cheese crust and we’re going to have fun with the name and try out some different flavors and dips. We see it as an appetizer.”
Dales says there’s a reason that Pizza 73 rejects a “if it’s not-broken-don’t fix” policy.”
“When we first started everybody was very keen and wanting to go the extra mile. It’s important to keep that mindset. After you’ve been in business 20 years and earned a good living, sometimes you tend to take life a little bit easier, and we want to keep a strong focus that we’re not going to just sit back and take what you can get. We want to be on the cutting edge, we want to be developing products, we want to be finding new and exciting ways to advertise and reach our customer and continue to grow our brand in the market place.”
For the future, Pizza 73 will continue its joint venture partnerships while also maintaining its family touch.
“It’s a good company,” Gary says before getting back to his long hours.
“They treat their people well and look out for you… just like family.”