Little Caesars hopes to overtake Australian pizza market

by GetSwift | Feb 3, 2017 | Uncategorized

Ernie Koury, Director and owner of Little Caesars, Australia, hopes to open 400 stores across the country.

From The Queensland Times —

IF YOU thought the pizza market was already overcooked, think again — because a US heavyweight is hoping to take a big slice of our $3.7 billion action.

Established in 1959, American pizza chain Little Caesars has their sights set on Australia’s fast food market, and hope to become the biggest pizza franchise in the country.

Opening its first store in Casula in 2014, it’s been a slow burn for the franchise to develop across the country — with just four stores currently sitting in NSW.

But according to Australian director, Ernie Koury, the goal is to boom that number well into the hundreds over the next decade.

Ernie Koury is Director and owner of Little Caesars, Australia. Source: News Corp Australia

“The market itself could easily sustain 400 Little Caesar franchises,” Mr Koury told news.com.au.

“But it’s important to get it right. This is not a contest of speed, and about how many stores I can build as soon as I arrive.”

Mr Koury, said his slow rollout is part of the plan to “develop the exact product required for the Australian consumer”.

“If I came to Australia and opened 20 stores at once, then realised we needed to change the format of our business to cater for local requirements — that would be much harder to do,” he said.

“That’s why we opened a single store, provided a product, and observed how it suited the marketplace.

“When you begin any venture like this, you need to make sure you have a core offering that you can watch, manage control and develop.”

Little Caesars Pizza currently has four stores in Australia, with the goal of reaching at least 400. Source: News Corp Australia

Mr Koury says after Sydney, he hopes to open five more stores in Australia by the end of this year. And while he isn’t definitive on location, Adelaide, Melbourne, Brisbane, and regional Queensland are all in his sights.

As the third largest pizza franchise in the US, Mr Koury says his ‘Hot-N-Ready’ offering — which allows consumers to purchase and collect a pizza within 30 seconds — is an industry gamechanger.

“There’s lots of meal time choices out there, but it’s how we service our customers — by eliminating the planning and ordering ahead — that can’t be beaten,” he said.

“You can walk in, and within 30 seconds you can have a pepperoni or cheese pizza available straight away.

“Pizza is traditionally a longer term sale process with a lot of planning involved. But with our drive-through service, it actually takes longer to receive your change than to get a pizza.

“It’s something you can’t get anywhere else in the country.”

Australians love their pizza, with Dominos and Pizza Hut gobbling up majority of the fast food pizza market. Picture: Jono Searle. Source: News Corp Australia

The Australian pizza market is currently dominated by Dominos, who have around 600 stores plotted across the country. Their franchise accounts for almost half of the sector, with Pizza Hut coming in second.

Last year, Pizza Hut brought out a significant portion of the troubled Eagle Boys pizza chain after they went into administration, and begun converting some of their stores with Pizza Hut’s own branding, boosting their overall store count to more than 320.

Research by IBISWorld predicts revenue growth of 2.3% in the pizza industry from $3.5 billion in 2013-14 to $3.9 billion in 2018-2019.

In the US, Little Caesars comes in as the third biggest pizza chain — after their first store was opened in Michigan almost 60 years ago.

The company has over 4000 stores in the US alone, and according to Nation’s Restaurant News, was recording annual sales of US$3.4 billion ($4.5 billion) in the US in 2015.

In Australia, the franchise has around 120 employees across NSW in its four stores.

“My father was the first franchisee to start Little Caesars in the western states of the US, starting off in Arizona” Mr Koury told news.com.au.

Domino’s Pizza currently has more than 600 stores across Australia. Picture: Jamie Hanson. Source: News Limited

“As a chain that was around Michigan, his store was the first Little Caesars to start the expansion across the country.

“From the age of seven, I was rolling dough with my family, where myself and my siblings worked from a very young age.

“Arizona turned into one of the best markets in the country, which is when he set his sights on Australia.”

Moving to Australia in 1986 to scout the market, Mr Koury’s father decided “the time wasn’t right” to bring the pizza franchise down under.

“My brother and I owned El Paso, Texas and a store in Southern Mexico which we sold in 2009,” he said.

“Then in 2014, I packed up my family and moved to Australia — opening a store in Casula later that year.”

Mr Koury said his business model went through some major adjustments in 2016, after feedback from consumers from his pilot store.

Initially, Little Caesars didn’t have the delivery service, and they also served a pizza “too big” for Australian consumers.

“We needed to launch a fleet of scooters because delivery is so big here,” he said.

“Customers also complained that our sizing was too big, there was waste, so we changed our pizza from 14-inches to 12-inches, and lowered our price for Pepperoni and Cheese to just $5.”

Little Caesars Hot-N-Ready pizza offering means consumers can get their 12-inch pizza in just 30 seconds. Source: News Corp Australia

Australia has become hot property for American fast food chains looking to expand their empire.

In 2016, controversial burger chain Carl’s Jr. opened their first Australian store on the NSW Central Coast.

The chain, which is known for it’s over-the-top burgers and sides, already operates in more than 30 countries.

At the time of opening, Carl’s Jr. had the vision of setting up more than 300 restaurants over 10-15 years.

To date, the chain has just two stores in the country.

Since its inception in 1948, burger chain In-N-Out has gained a cult following all over the world for its simple but tasty burgers.

Based out of Irvine, near Los Angeles, In-N-Out outlets can be found all over California. It’s also expanded to outlets in Arizona, Nevada, Utah and Oregon.

And while the chain has no intention on moving permanently to our shores, they have ‘popped-up’ in several establishments across Sydney over the years — causing burger-mania in its wake.

Just last month, the chain set up shop in Surry Hills, where obsessive burger lovers lined up hours ahead to get their hands on a burger.

From a nutrition standpoint, Australia has one of the highest obesity counts in the world — with almost two in three adults either overweight or obese.

That’s more than 10% higher than in 1995.

With consumers shifting away from fast food options, and into healthier alternatives to combat our growing waistline — Mr Koury believes his offering still has a place in the market.

“We make our dough from scratch, and never use concentrated tomatoes in our sauce,” he said.

“We are always exploring new products, and are working on a salad concept within our stores. “But from a nutrition standpoint, we take measures to make our pizza healthier — by not using oil in the pan, and having corn meal instead, and by not adding MSG to our pizzas.

“So when I look at pizza, and people say its horrible for you — we aren’t selling it as an every day option. It should be a fun food, and a treat.”

Red Rooster says home delivery a ‘silver bullet’

by GetSwift | Feb 1, 2017 | Uncategorized

From news.com.au — 

IT’S the year of the Rooster, and not just for the Chinese.

Red Rooster, the ageing chicken brand founded 45 years ago in Western Australia, is undergoing its very own cultural revolution, with plans for a major expansion into NSW and Victoria as it sets its sights on Domino’s in the home delivery market.

Chief executive Chris Green, who joined two years ago after nearly three decades at McDonald’s, has kicked off a massive transformation program, refurbishing ageing stores, rolling out a fleet of 400 distinctive red delivery cars, and launching a loyalty program which has already signed up 300,000 members.

With 360 stores, Mr Green plans to open 15 to 20 new locations every year out to 2020. Red Rooster is now turning over $480 million in revenue and is on track to hit $500 million this financial year off sales growth of more than 5 per cent.

“This financial year we’re going to have the strongest growth for a long time,” he said. “The previous year was probably three to four per cent, but the last two years we’ve been outpacing the industry.”

Delivery, he said, has been the key to Red Rooster’s new-found success. Launched two years ago in Sydney’s Baulkham Hills, delivery has expanded to 240 stores and now accounts for 10 to 30 per cent of sales, the majority of which has been incremental growth.

“We refer to it as the ‘silver bullet’ internally, it’s massive,” Mr Green said.

He said while Domino’s had dominated the delivery market, “Woolworths and Coles don’t deliver roast chickens, so there’s sort of a hole in the market”.

“The growth has been amazing,” he said.

“It’s introduced new people to the brand, whereas in the past they might have driven past some of our locations, which maybe didn’t look so good on the outside. Probably a key part of it is the red delivery car. These shiny red cars are all around the neighbourhood of the franchisee providing great marketing.”

Red Rooster has invested around $1.5 million developing its own online ordering system, as well as partnering with Menulog. “People are discovering Red Rooster on Menulog, and it might be either the first time they’ve had it, or they haven’t had it for a long time,” he said.

The new store push will be focused on inner-city areas in Sydney and Melbourne, where the brand has traditionally had difficulty finding drive-through sites. Most of the prime real estate is taken up by McDonald’s.

A new, smaller-format store in the style of Domino’s or Subway shopfronts, will solve that problem. “In Sydney, there are actually about two million Sydneysiders that can’t access Red Rooster,” Mr Green said.

“But this new model, because it’s reliant on delivery, it opens up a lot of new areas.”

Franchisees’ capital expenditure for the small-format store is around $350,000 to $400,000, compared with costs in excess of $750,000 for a typical drive-through location. Rental costs are also much about half those of a drive-through, generally under $100,000.

“We’re targeting $20,000-plus per week in sales [at the new stores], but our first location in Goulburn has already exceeded all expectations,” Mr Green said.

Going forward, the business is aiming for a 50/50 split of drive-throughs and small-format shopfronts. Currently the business has 300 drive-throughs, 30 smaller stores and 30 stadium or airport locations.

“When we can get a drive-through that will always be an option, but in built-up areas like the northern beaches or inner-city Sydney, those locations are very difficult to source,” he said.

Mr Green said Red Rooster was taking lessons from Domino’s, even rolling out GPS tracking to more than 40 restaurants. “They’ve absolutely been the leader but I would say in the last two years we’ve almost become off the charts as a strong competitor,” he said.

“There are some things that Domino’s does that are gimmicks, we’re probably a bit more focused on the customer.”

‘FAILED TO EVOLVE’

The Red Rooster brand has “enormous opportunity” that has largely been missed over the past decade or so, Mr Green said.

“I’d always admired Red Rooster as a brand,” he said on his decision to leave McDonald’s. “It probably was at its height in the ‘80s and ‘90s and it went through a bit of a decline after that.

“They were owned by Coles in the ‘80s and ‘90s and that’s when the brand did really well. It had that parent that was able to guide it both from a brand and real estate perspective.

“But from around 2000 to really about three years ago, it failed to evolve, and mainly that was a lack of reinvestment in the restaurants, so a lot of restaurants did become rundown.

“So it was a big attraction — a well established Australian brand with lots of opportunity to capture and grow.”

Mr Green said the first thing he did when he came on board was work with franchisees to refurbish the ageing stores. In his first year the company worked with franchisees — Red Rooster only has 10 company-owned stores — to refurbish 75 restaurants, when in the previous two or three years there had been fewer than 10.

“A lot of the signage was replaced, the exteriors were painted, gardens were cleaned up, the dining rooms, floors, settings, tables and ceilings [were redone],” he said.

“So that was big. That signalled a lot of change to people that had maybe stopped visiting Red Rooster because the competitors looked better.”

Menu changes, including salads, updating the 30-year-old coleslaw recipe, and introducing new seasonings, have also had an impact, he said.

Overall, the Year of the Rooster is looking big for parent company Quick Service Restaurant Holdings, which also owns Oporto and Chicken Treat.

QSRH was bought by private equity firm Archer Capital for $450 million in 2011. Archer is mulling either a stock market float or sale of the business later year.

Mr Green said if he had to bet, he would say an IPO was more likely. “But it’s open to both,” he said. “The most important thing is we have differentiated strategies for all three brands and different target markets.”

QSRH’s three brands have a 25.4 per cent market share of the $2.9 billion takeaway chicken shop industry in Australia, according to IBISWorld, behind KFC operator Yum! Brands which has 41.6 per cent market share.

Restaurant group Collins Foods, which also operates a number of KFC restaurants in Queensland, WA and NT, has a 15.5 per cent market share, while Nando’s sits on 10.8 per cent.

“Like many fast-food providers, [QSRH] has faced increasing competition from new forms of fast food over the past five years,” IBISWorld industry analyst Andrew Ledovskikh said. “Profit has remained relatively steady despite weak revenue growth, as a focus on franchising revenue has supported profit margins.”