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EVERY NOW & THEN
By Lucas Leigh
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"I just wanted to be a football coach," Johnny Huntsman, founder of Johnny’s Pizza House, told PMQ. But he ended up in pizza. Johnny’s Pizza appeared on the cover of PMQ’s Spring 2000 issue with their story of restructuring the brand in the eye of the public (http://www.pmq.com/johnnys_pizza_house.shtml). Johnny took to the streets with signs, a barrel, and overalls, advertising their pizza and asking patrons to ‘Please Eat Johnny’s Pizza.’ The marketing ploy drew all the newspapers and radio stations around the state, turning their brand around overnight and saving them from bankruptcy via a simple, free, publicity stunt.
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| Although founder Johnny Huntsman is no longer working in the stores, he still maintains a position as spokesman and continues to lead by example. He is involved in civic affairs with a variety of organizations including youth and charity groups. |
Present Day: Johnny’s Be Good
Johnny’s has had a very interesting past few years since our story in 2000. They’ve implemented a system that keeps employees around for years, some of which have been with the company for decades. They’ve opened several new units, have gotten involved with the communities’ school systems, and have reduced Johnny Huntsman to spokesperson and chairman emeritus of the board, leading him through the exact exit strategy Johnny had wished for over the past decade. President and CEO for Johnny’s Pizza, Melvin DeLacerda, said pizza is still a growing food in the state of Louisiana and attributed its growth to lifestyle changes over the past few years for many Americans. With two new units just last year, Johnny recalled the beginning of his pizza dream. “When we opened the very first unit 40 years ago, pizza in this area was a real novelty,” he bethought. Longtime dreamer of being a football coach, Johnny got into the business of pizza while playing college ball. For a pizzeria that now employs 572 people and sells about 50,000 pizzas a week, that’s a huge improvement.
ESOP = Employee Retention
Aside from working with a popular and stable company, the employees of Johnny’s Pizza House now own 51% of the company—which makes working for Johnny’s Pizza House very desirable. Johnny Huntsman said this program, which they’ve been doing for a few years, worked really well for the company and that it doesn’t cost employees one cent to opt into the ESOP (Employee Stock Ownership Plan). “We’ve been at it now for about five years,” Johnny said. “It’s available to every employee in our system.” The labor department and the IRS govern the ESOP program. “We’re required to allow everyone that’s worked for the company at least one year and that’s at least 21 years of age to participate in the program. The amount you get is based on the number of hours you work, the employees’ compensation, and the number of years you’ve been with the company,” he said, noting that some of their managers have tremendous amounts in their accounts. “At the end of 2005, one of our manager’s accounts was worth $140,000,” Melvin said.
The employees don’t have to monetarily contribute to the plan at all. “When we first established this plan, we borrowed money to purchase the stock from Johnny. As the loan is paid off, that stock is released to the participants. Once all that stock has been allocated, there is no more stock until more is purchased. Every year, some of the unvested former employees will forfeit their account and that stock is reallocated,” he added. To become vested in the program, an employee has to stay with the company for at least three years. After that time, the amount that’s in their account can be taken if they wish to. If they ‘cash out’ their account, that stock can then be reallocated to other participants. Dividends are also paid out to the stockholders as the year goes by. Melvin explained that the board decides how often the dividends are paid each year. “We declared dividends four times last year, this year we may only declare three times,” he said. “The good thing about this private company program is that the shareholders don’t have to pay any taxes on their dividends, only on their distribution (the amount that’s accumulated in their accounts) after they cash out.” Johnny’s has been fortunate that since the inception of the program, their stock has gone up. “If we have a bad year, the value of the stock could go down.” Currently, the ESOP’s share, or 51% of Johnny’s Pizza House stock is worth just under $12 million.
Johnny explained how this program came about. “None of my children or family are involved in the company so I was looking for an exit strategy and we had a few companies make a run at us, and we had some interest from different places, but a lot of the folks I’ve worked with were skeptical. Someone mentioned ESOP and I looked at it and saw a great possibility.”
Johnny said since the initiation of the ESOP program, there have been many inquiries from investors interested in the business and the value attached to the program.
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| Johnny’s does three major mailings each year: A promotion for their famous Cajun “Sweep the Swamp” pizza, which is in season from early February to May; A summer promotion, and a holiday promotion. |
Promoting by Season
Melvin said their best marketing tool has been direct mailers, supported with television and radio advertisement, as well as billboards. “We really see huge impact from dropping mailers with appealing specials. We have coupons with the mailers that discount the most popular pizzas, we’ll bundle some things. We have a buffet in about half our locations, and sometimes we’ll do a ‘buy one get one free’ special.” Johnny’s does three major mailings each year: A promotion for their famous Cajun “Sweep the Swamp” pizza, which is in season from early February to May; A summer promotion, and a holiday promotion. “We mass mail all of our areas and everyone in our database, so we’re doing this about every four months or so,” he added. Their solo-piece mailings usually reach around 200,000 people every three to four months. Melvin said the return they see on this is in the 2 to 3% range. “We use a separate piece so it stands out more. It’s an oversized postcard so it stands out from the clutter. It gives a clear presentation of our product.”
Among other things, Johnny’s also sends coupon books about twice a year as direct mail pieces. The coupon books have about 10 pages with various discounts from “Free Breadsticks with any 12-inch or 14-inch pizza” to a “14-inch party pizza with an order of breadsticks for only $9.99.” Melvin went on to explain the coupon books. “The first one I remember seeing was from KFC. They used to do this. It was a pretty neat deal because the customers will hang onto the coupon book and use it until the expiration date rolls around. It’s been very successful for us.” Melvin said they usually set an expiration date of about six weeks.
Pig Out Night
Melvin said most of their marketing is focused on the women and the children because they’re normally the decision-makers of the family. “We try to appeal to everyone, but the family is the focus of our marketing.” He explained how they stay active in the community and with the schools as a main focal point. “One of our biggest fundraiser is what we call ‘Pig Out’ night. We get the school involved on one of our slower nights, like Monday nights, and all the sales are generated from five to 10 o’clock. A percentage of the proceeds go to the school or organization. It’s an ongoing thing we have in just about every one of our restaurants, so just about every week there’s three or four ‘Pig Out’ nights between all our restaurants,” he said. “Whatever normal specials we are running would be available that night. We ask the teachers to be involved, and as a result we give the teachers a discount card they can use over the year with their families,” Johnny added. “Sadly, it’s one of the few times the teachers meet the parents outside of school in a more enjoyable environment, and it’s not uncommon for us to write a $400 or $500 check to them.”
Johnny has an endowed scholarship at the University of Louisiana at Monroe and serves as a sponsor in the Adopt-a-School Program. Also, the company has a tuition-assistance program for employees, which pays for three hours of college each semester. “That’s for employees that have worked for at least two years uninterrupted,” Melvin explained. “Even if they finish college and decide to move on, we’re still glad to educate them because we value education and think it’s worth the money we’ve spent.”
Take-and-Bake
Johnny’s Pizza House began thinking about the take-and-bake market as Papa Murphy’s inched closer to their home and they now do a good business with the take-and-bake product. “We’re the only place in our market that offers take-and-bake. It fills a void for certain people that want that product but want to take it home and cook it instead,” Melvin said. A take-and-bake pizza at Johnny’s costs the same as a normal pie would that’s cooked in the restaurant. It’s even made fresh to order and not frozen beforehand. They include coupons on their mailings and also sometimes push take-and-bake with box toppers, although Melvin said it’s a small part of their overall business.
Johnny’s has dabbled in the more healthful options of pizza, but as Johnny says, “People would call up and ask what’s on it, and they would say, ‘Okay, give me the healthier cheese and crust with the veggie toppings, but add double sausage to that.’ The large majority of pizza customers order the same order they had last time.”
Among things not pizza, Johnny’s Pizza House offers Muffuletta sandwiches, bread sticks, salads, Buffalo wings, and cinnamon sticks to finish it off.
Conclusion
From one tiny store with three parking spaces across from a college in Monroe, Louisiana, in 1967 to the largest locally owned pizza chain in North Louisiana today, Johnny’s Pizza has come a long way, tossing and turning the area’s favorite pizza without fail day after day. With a strong hold on employees through their innovative ESOP program to their seasonal specials that people look forward to year after year, it’s no surprise pizza man Johnny Huntsman has been so successful with his 40-year-old business. And to think he wanted to be a football coach!