While not the number one fast food in America (hamburgers are still king), pizza is arguably one of America’s favorite foods. According to “Pizza Industry Analysis 2015 – Cost & Trends”, 93% of Americans eat at least one pizza dinner each month. Combined pizza sales (dine-in, take-out, delivery, and frozen) in the US approaches $40 billion a year, with frozen pizza sales taking the honors as the fastest growing market segment in the country [1].
“Pizza was commercially introduced to the United States in 1905 in New York City. From then through World War II, it was generally only available in New York City and Chicago due to the large Italian immigrant population in those large metropolises. Pizza exploded on the national scene at the conclusion of WWII when GI’s returned to their homes throughout the country looking to satisfy their pizza cravings developed while campaigning in Italy. Even though pizzerias were common across the country in the middle to late 1950’s, pizzerias were independent, family owned businesses”. [3] “The pizzeria landscape started changing in 1958 with the introduction of the Pizza Hut franchise in Wichita, Kansas. Even though it started with a single store in 1958 and only expanded to two stores in 1959, by 1966, Pizza Hut had grown to 145 stores across the country. In 1968, Pizza Hut went international with its first franchise store in Canada”. [4]
Pizza hut may have been the first pizzeria franchise business, but it wasn’t the only pizza business. It was soon followed by several well-known pizzeria chains: Little Caesar’s Pizza (Garden City, Michigan) in 1959 and Domino’s Pizza (Anne Arbor, Michigan) in 1960 (more on that in the rest of the case study). Pizza is big business. PMQ (an industry publication) tracks and reports on 50 pizzeria franchises in the United States, ranging in sizes from the behemoth chains with a national presence like Pizza Hut (7,908 in the US alone) down to the small regional chains like Dion’s Pizza (20 stores in New Mexico and Texas) founded 1978. Papa John’s (Jeffersonville, Indiana), the last of the mega-franchises was established in 1983. While independent pizzerias have given up a large market share to pizza chains, they still account for the majority of the pizzerias (54.25%) across the country[5].
The large chains have a competitive advantage over the independent pizzerias and that is purchase power. The large chains can buy ingredients in large quantities and take advantage of volume discounts while the independents and small chains must pay market price. There is a down-side to being large and that is maintaining quality and consistency of product across the country. Whether you are in Seattle, WA or Miami, FL when you order a pizza from one of the large chain pizzeria, you expect consistency of in the look, feel, and taste of the product. To achieve consistency in its products, the large chains have developed strategies for managing and running their supply chains.
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