Pizza chain sales are down:
- Pappa Johns: -5.7%
- Pizza Hut: -12.9%
- Dominos: -6.5%
- Sbarro: -6% domestic, -13% internationally (taking into account increase in US dollar)
Sbarro’s attributes a drop in sales to a drop in mall traffic.
What is up? Frozen pizza sales.
Frozen pizza sales rocketed to $4.4 billion in America last year from $3.1 billion in 2000, the Minneapolis Star Tribune reported this week, citing market research by Datamonitor Inc. Sales of private-label brands (produced by chains such as Walmart, Jewel, Dominick’s and Target) have risen more than 20 percent in the past year. Clearly, cost and an acceptable level of quality is at play here.
In related news, Kraft Foods Inc., maker of DiGiorno, Tombstone and Jack’s, said it selling their brands to Nestle so it can fund an acquisition of Cadbury.
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Ryan is an attorney and valuation specialist residing in Chicago. He chronicles his thoughts and research on FranchisePundit.com. You may reach him by email ryanknoll@gmail.com or mobile telephone 312-212-3423.
I think this is where a lot of approaches to franchising simply fail. In general (warning sweeping generalization) restaurant concepts rely on the branding effect of franchises too much and personal relationships with clients too little.
For example the pizza concept I am involved with has held net about a 3 ½% over 2007, although gross has increased. The reason, we had a relationship with our customer base and were able to offer inducements to come in and actually increased sales though the inducements ate into our margins; however, we were able to make the same net profit with greater volume.
Back to my supposition, once again I think the Achilles heel of franchising restaurant concepts is it is often all about the concept and not about personal relationships. During harder times people want to go where folks know their name and they feel genuinely valued.