About three years ago at the NAPICS Show in Columbus, Ohio, Big Dave told me he knew a guy he had consulted with that he wanted me to meet. He introduced me to Sean Brauser of Romeo's Pizza in Medina, Ohio, who had just bought the pizza shop a few months before. Little did I know that in just two hours he would win the 2002 Pizza Pizzazz competition.
Since then, I have come to know Sean quite well and watched him become one of the best pizza makers in the country, in addition to becoming a savvy pizzeria operator. We've traveled to Italy, Las Vegas, New York City and nearly all points in between together. I was talking with Steve Green one afternoon about some great things Sean was doing and the reputation he had earned from winning the 2004 American Pizza Championships and the Pizza Pizzazz twice. "Why don't you go out and get a story on him?" Steve asked. Steve was right. When you spend as much time with someone as I have with Sean, sometimes you tend to overlook the obvious. This past February, I went to visit Sean and his wife, Pam, and got a gem of a story and some great lessons I think should be shared. Here is his story.
Getting in the Pizza Biz
"After I graduated from college, I became an accountant for Johnson & Johnson and hated it, but I dealt with the marketing department there and learned a lot," Sean said. "In 1996, Pam (my wife) and I decided to quit and buy our first pizza shop in New Jersey. We owned it for about two and a half years, then sold it and moved back to Ohio where I worked as an accountant again. I couldn't stand working for somebody else, so I resigned and bought into a pizza franchise operation in Cleveland. We got out of that about two years later, and in 2001, we got involved with Romeo's Pizza. It was doing great numbers sales-wise, but wasn't making any money. As an accountant, I saw some real opportunities for improvement. If you don't have an accounting background, get a good CPA who understands the restaurant business. I would recommend going and taking an accounting class at a local community college. I run my business on numbers. There are some key numbers that you must understand and control in order to make money. These include how to calculate food costs, labor costs, contribution margin, ideal price analysis for your menu items and breakeven analysis. My labor target is about 25 percent and food cost target is about 33 percent. The most important number is your contribution margin, which is profit after food costs and labor costs. After that, you need to understand your overhead and breakeven points at different levels."
Lessons Learned: Employees
Sean made some common mistakes when he first started managing a pizzeria. "We tried to be our employees' best friend in our first store, but soon realized that they were not thinking the same way we did," Sean said. "They were punching the clock, and we were growing a business. We realized that we couldn't be everybody's best friend…we had to be the boss. Not knowing how to handle employees was rough, and I think that's what burned us out at our first place. We immediately put our system and rules into place in new locations. When you buy an existing place, most of the existing employees are not used to being challenged, which may be one reason why it's for sale. Sometimes, the best thing to do is just clean house and start over. We do interview the old employees, and some are rehired. I have a sign in my office that says, 'You're either part of the steamroller or part of the pavement,' and I make sure everyone understands that."
All of the shops Sean has purchased have been existing pizzerias. "From a cost perspective, existing locations are significantly less than building out a new store," Sean says. "You have all the permits in place, the health code is ready, the equipment is in there and usually you can get pretty good financing from the seller.
"We paid about $90,000 for our newest location, and only had to put $20,000 down. We didn't have to put a whole lot into it. The oven and computer system were there, so from an equipment standpoint it was a good deal. The seller told us the sales were between $5,000-$6,000 per week, but they were actually doing about $4,000 per week. We have almost tripled their sales in about three months. (HOW?) A lot of ways…we publicize and advertise. ADVO is our main way of distributing our direct mail."
Buying Existing Locations
Sean has purchased four pizzerias since getting into the business. "We target a city as opposed to opportunity. We have pinpointed specific cities we want to be in based on population and the demographics," Sean says. " We will stay away from markets where customers won't pay more than five dollars for a pizza because we certainly can't get full price for ours. We can't do that and make money. We market our quality above all else. In terms of a purchase price for an existing location, we're looking at sales and what kinds of additional investments I would have, such as a computer system or ovens. The existing lease also can determine the price."
Calculating a Buying Price
When buying an existing location, determining the price can be a poker game. "You try and assess their situation," Sean says. "How long have they listed their store? How bad do they want to get out? That affects the price. I break down their sales and costs, and determine where the cash flow is in the business. What kind of payment would actually justify that cash flow? Take the payment and back that into a net sales price with a five-year payment plan at 10 percent interest to come up with what a price would be."
The Initial Goal
Once Sean finds a location, he sets basic goals for converting it to a Romeo's Pizza. "The first thing is just awareness," he says. "Trial comes out of that. We give a lot of pizzas away to events that have a lot of people. If they like the pizzas, they will come back for more.
"At our newest store, all of the big franchises are there, which I'm not afraid to go up against at all. I didn't have to deal with five-dollar pizzas, and there wasn't a big price war going on. With this new location, I have a partner. He is one of my managers who invested with me, so it's his @ss on the line too. When opening second or third locations, you notice all of the little things you have done in your main location to make it successful. You don't realize how far you have come until you have to go drop all 40 of those ideas into that new store in three days."
Lessons Learned: Entering Cooking Contests
One of the things that has launched Sean into the spotlight is winning multiple pizza contests, which is one reason why he is so adamant about product sampling. He won the Pizza Pizzazz at NAPICS in 2002 and 2004, and won the first-ever American Pizza Championship, which is held at PMQ's New York Pizza Show. "I was in Columbus in 2002 just to see Big Dave," Sean says. "He mentioned how the Pizza Pizzazz competition had helped other operators, so we entered at the last minute. We used the Butcher Shop Pizza and ended up winning first place. It was just this huge, great thing. That was the first one. The next year we thought we'd win again with a different pizza, but didn't even place in the finals. In 2004, I brought back the Butcher Shop Pizza and won first place again by like four points. The experience was incredible. It gave us a new sense of confidence a free trip to Italy to compete at the World Pizza Championships."
Winning is good, but not enough…you have to capitalize on the opportunity. This comes in the form of getting the free publicity from winning. "With the first win I called some local media and got one appearance on TV. The second time we won, I knew the people we needed to talk to. We got the front-page story from our local paper. I was on all three major TV stations, as well as a number of radio stations. I called them all. I didn't email. You want to talk to them personally. So once we got that going, the publicity was free. Once you are on media and TV, people think you are the best, and that's priceless. Since then I have been on the Food Network, local television, radio and newspapers. You can't buy that kind of advertising. The key is finding someone who says 'I like this story.' You have to get the journalist interested in it, not the necessarily the producer or the editor. You really need to be very persistent."
Contests Earn Corporate Sponsorship
After winning the Pizza Pizzazz twice and the American Pizza Championship, Sean contacted RDP, his Ohio food distributor, about an endorsement opportunity. "I created it out of nothing," Sean said. "I took the idea to my supplier and told them I'm the only three-time U.S. pizza champ, I've got a PMQ story coming, people are going to know me in the pizza business, and I want to represent RDP." RDP has some progressive ideas about customer service, including a web-based order and tracking system. They will use my name and likeness as a customer and an endorser. The salespeople love the idea because it creates a link between customer and distributor. I am going to conduct some seminars for their other customers on food costs and be featured on their website where customers can ask questions and I can help get an answer. Winning these contests has helped me gain publicity, new customers and opened up other opportunities."
Before the competition, Romeo's sales were around $12,000 per week, and after the first competition, they jumped up around $14,000 per week. "When we won the second contest, they jumped up to $17-18,000 per week. I attribute most of that to winning that contest. The sales jump we received from publicity was gigantic when compared to other forms of advertising. Everyone in our town tried us, and I think people want to be associated with success. You know, 'we eat at the best pizza place in the country' mentality."
Romeo's spends about 3 percent of sales on advertising. "I try to focus my marketing message on quality and what we've accomplished (winning contests). We do this with direct mail and box toppers. The biggest key is finding a way to get other people to promote your business for you. In marketing, if you're the only one saying the message, people start tuning out. We have customers running around telling our message for us to their friends and family. We put our accolades on pizza boxes and in the windows to generate free advertising, We also use Kamron Karrington's Black Book as our pizza marketing bible, and have learned what offers most likely will be used and how the ad should look."
Every pizzeria is constantly being solicited to make donations. Sean says sometimes they give out gift certificates, but usually they give out pizzas. "I don't think customers ever come in because we gave money or sponsored a team, but they do come in after they taste the pizza," Sean says. "We don't sponsor teams or anything that takes a cash donation. I would rather send four or five pizzas to a game or event. If they like the pizza they'll come back. It takes a while to thicken up and say 'no', but it's more effective to just get your pizza in people's mouths. Because it's free and not heavily discounted, we don't damage the perceived value of our pizza."
Concessions and Schools
To get Romeo's pizza out there, Sean does a lot with school concessions. "We do the concession stands at football games, basketball games and soccer games because we actually do make money. It's great marketing because people are eating our pizza. We're able to touch a lot more people from the concession stand than from a schoolroom cafeteria. We leave boxes out and fliers so people will know it's from Romeo's.
"Usually the PTA or the junior class runs the concession stands, so you have to establish yourself with someone new every year," Sean says. "I lock them in and give them an exclusive price, and tell them that they can't tell anyone about it. We discount it about a 20 percent. I don't count labor as a cost factor because it's all incremental business. If I set up a program that's run by parents, I give them the same deal. They can sell the slices for $2 per slice and make $16 profit off the pizza."
Romeo's also employs direct mail to boost sales. "I've used a saturation mailing where I had all the addresses on a certain street. I send everyone on that street a coupon for a free pizza, and a personal letter from me inviting them in and telling them who we are. We also print "Free Pizza Inside" across the front of the envelope. We stopped doing it because with a 40 percent redemption rate we couldn't keep up. It costs about 40 cents to mail the coupons and the letter, including postage. I know if I get 10 new customers, six will come back once or twice a month. One out of 10 will be a once a week customer.
"We target specific streets with families. I usually don't mail to apartments because of the amount of instability. I want to hit people who will take advantage of the offer and come back for years."
Advice for the Pizza World
Sean offers this advice for newbies and those working long, hard hours: "This business is all about the system that you put into place. The more that system relies on you, the more frustrated and tired you will become. Do whatever it takes to be successful, and never shortcut on your product. Jump in with two feet and don't look back, just know you're doing the right thing, and keep educating yourself and making things better. Part of it is just always believing you're going to win."
Romeo's Pizza is just now starting the process of franchising their business. "We want to be known as the first 'Fran-Dependant,' as consistent and smart as a big franchise, but we want to treat the customers and provide the quality product like an independent." We are working with another pizza shop owner who wants to convert his shop to a Romeo's Pizza franchise. We tripled the existing sales in that spot; we think we can do the same here too. "