Little Caesars’ Comeback


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BY 1851
September 20th, 2012
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By STEVE COOMES

Editor’s note: Steve Coomes covered the pizza trade for nine years as editor-in-chief at Pizza Today and founding editor at PizzaMarketplace.com. During that time, he covered the fall of Little Caesars from its height as one of the world’s largest pizza companies. It has since rebounded nicely.

On a midsummer’s night in 1999, Little Caesars Pizza closed more than 400 stores in one fell swoop. Arriving to open for lunch shifts the next day, employees found doors padlocked and learned from the Detroit-based company—then the third largest pizza chain in the world—their paychecks would be mailed to them.

Then at Pizza Today, I called the company’s headquarters to inquire about the mass shutdown. A spokesperson for the legendarily tight-lipped, privately-held company, founded in 1958 by former Detroit Tigers player Mike Illitch and his wife, Marian, would say little more than confirming the store closures. No were reasons given as to why between 6,000 and 9,000 people were suddenly unemployed.

Shortly after, its then COO, Harsha Agadi invited me to Detroit for a chat, saying he was eager to explain the company’s plan to get better and its repositioning strategy. I was shown a new store prototype being tested in the city, and saw new bundled lunch offerings designed to improve that daypart’s sales.

Yet, when pressed for details such as store numbers, Agadi was evasive, saying only, “a ballpark number of about 4,000.” (Years later, I talked to a former president of the company, who told me Little Caesars had peaked at one time to nearly 5,500 units.)

From that publicly declared baseline, trade media began tracking Little Caesars’ decline—and store numbers were plummeting. Franchisees were fleeing the system, claiming the parent company, Little Caesar Enterprises, Inc. (LCE), was not honoring its franchise contracts. Whole markets where Little Caesar stores once proliferated dried up, sometimes in a mere matter of months.

As the free-fall continued, franchisees sued LCE for breach of contract and corporate troops dug in for a protracted legal battle.

When the dust settled in 2005, franchisees emerged victorious with a new agreement that included millions of dollars in concessions and the promise of a better, brighter future for the once formidable chain.

The road to reconstruction, however, would be a long one, as unit numbers had withered to 1,800 stores, nearly one-third its peak. The turnaround was handed largely to a young and forward-thinking vice president named Dave Scrivano, whose mission was to get back to what made the company successful: value-priced pizza. Large operational changes were imposed, such as:

  • All stores stopped delivering and shifted to lower-cost carryout-only units.
  • Menus were paired back to pizza, Crazy Bread and wings. Gone were salads and sandwiches.
  • Franchisee advertising contributions were slashed from 4 percent of gross sales to 1 percent, which ended its national advertising campaigns and shifted marketing focus to local store efforts.
  • Overcharged for decades on food, supplies and equipment by the company’s Blue Line distributorship (which also denied store operators promised rebates on products), franchisees won the right to buy from multiple vendors approved by a product quality committee made up of corporate and franchisee representatives.
  • The company also launched its notable $5 Hot and Ready pizza campaign, which slashed transaction times at stores and boosted sales.

The company remains as private as ever, but Nation’s Restaurant News estimates its store count to be past 3,300. And while Scrivano is widely credited with the turnaround, precious little public praise has been given the man who, for the first time in many years, calmed tensions between franchisees and the parent company.

Almost a decade since its franchisees sued Little Caesar Enterprises, the company is growing nicely with investment by new franchisees. The company is still as quiet as ever about its financials, but based on the occasional proclamation of positive same-store sales, best estimates put total revenue near $1.5 billion and growing annually.

And eight years after Scrivano took the helm, Little Caesars’ recognizable mascot returned to national TV advertising with its quirky, but memorable “Pizza Pizza” message.