This is the 2nd article in a series exploring Toppers’ sustainable competitive advantage
In the late 90’s when tech companies were first the rage, I scribbled out a few of my own ideas for tech oriented businesses, and off-handedly told more than a few people that I wanted to start an “internet company”. Little did I know at that time, I was already running one!
As I established in the 1st article in this series, “Pizza IS a Growth Industry (for some)”, there is substantial growth happening in the Pizza business for certain players; winners and losers, if you will. I recently returned from a conference where I attended a panel of Private Equity investors that were asked to discuss business and consumer trends that their firms were looking to take advantage of. It was no surprise to me to hear one panelist describe the opportunities that they see in certain segments of the Restaurant Business that are positioned to capitalize on large important shifts in consumer demands.
One of those critical shifts is Technology. Pizza delivery companies are in a particularly good position to capitalize on the consumer demand to order online. 50% of the US population is less than 30 years old, and those people (and the rest of us!) want to do everything possible on their phone and other mobile devices. [I believe that incredible opportunities exist for most, if not all businesses that see that future and invest into serving customers this way. I recently tried to convince my old-school brother in the carpet business that our kids will buy their carpet on a device…not in a big carpet store. You watch.]
An incredible 42% of Toppers Pizza’s sales today are obtained through our website-commerce site, toppers.com! There are top-5 pizza chains that aren’t reporting numbers that high! This statistic has climbed steadily and will no doubt cross the 50% mark in 2017, if not late 2016. When we open a new restaurant, we know that hundreds of thousands of dollars of annual sales will reliably be delivered to that store on toppers.com!
Choosing this high tech route has changed our business in so many positive ways, as you can imagine. Customers are more satisfied. Their orders are more likely to be accurate, and they do not feel rushed on the phone with an order taker. Even though customers can order in seconds with just a few clicks, most take their time, looking at pictures, browsing the menu and offers we tee up for them. They customize their pizzas at a high rate with quality toppings that are unique to Toppers. Ultimately, they get more of exactly what they crave and on average spend quite a bit more.
Restaurants are much easier to run when almost half of all orders are simply arriving from the website! Compared to the days when the phones were ringing sometimes hundreds of times an hour, now it is simpler and even quieter during the rush as the orders stream to the kitchen lines for Toppers Pizza makers to hand make! Our franchisees and managers do not need to staff quite as many people to handle the high volumes of business and this improves store profitability while providing better service and keeping prices down for our customers.
Of course we have incredible data that we dissect to run better, more efficient restaurants, serve our customers better, sell more, and generally to crush the competition! Many of our customers want us to interact with them online and provide them alerts, emails and texts with offers and reminders. Marketing today is completely different than it was just a few years ago.
When nearly half of customers are making the choice to order online, what does that tell you? It tells me that pizza companies that either don’t have that functionality or have functionality that sucks (and most of them out there do!) will lose market share. And that is exactly what we are seeing today. There are a relatively small number of pizza companies that have built and are investing into next generation, state of the art consumer websites. Companies like Amazon have created a customer expectation of sleek, simple, and rich functionality that is not cheap to deliver, but it’s a commitment that Toppers has made for its franchisees and customers.
In the mature burger business, chain restaurants account for approximately 95% of all burger restaurant sales, while in the pizza business, chains account for only 56% of all sales, but that number is climbing steadily. Mom and pop pizza places, while I love them mightily, will continue to lose market share to emerging companies like Toppers for many reasons. One of those reasons is technology. They simply can’t make or sustain the level of investment necessary to give the customer what they demand in this arena.
The $40 Billion US pizza business is in flux. There are significant winners and losers inside that $40 Billion. To understand how Toppers Pizza has continued to steal market share and grow by about 25% every single year, you have to understand what is happening inside the pizza business overall. When you do, you’ll understand why we are so confident about the future and where we are headed.
We pride ourselves on our made-from-scratch pizza and Topperstix, delivered fast by the best and proudest restaurant people on the planet. But we are also proud of our innovation and technology. It took me a few years to get there, but I am proud to say that I run an exciting Tech Company.
Watch in the next few weeks for my last installment in this series.
Your favorite Pizza CEO,