Straw Hat Pizza Case Study: In Shaky Economic Times, California Franchisor Rides the Wave of Success to Significance
Pizza maker to open 50th store, boasting 30 percent growth in last six months
San Ramon, CA - July 23, 2008 In a shaky economy, as more people interested in running a business turn to franchising, California pizza maker Straw Hat Pizza is boasting a built-in road-map to success, one that has driven business growth up 30 percent in the last six months to 52 stores from 38. By September, the chain plans to have 55 stores.
Poised to celebrate its 50th birthday, the chain is growing rapidly in the midst of a recession. Straw Hat plans to more than double in size, increasing its locations from 52 to over 100 by 2010, and expand from California, Nevada and Oregon to Washington, Arizona, Texas and beyond. What’s more, it has recently added a two new concept restaurants called Straw Hat Express and Straw Hat Grill, and plan to expand that to targeted cities and states on the West Coast. The new-concept “Grills” expand the pizza menu to the next level, featuring typical sit down-eatery fare such as pasta, steak, ribs, burgers and pizza.
“During economic slumps like this, we offer a lot of benefits for those downsized from corporations who are looking for jobs and income,” says Jonathan Fornaci, president of Straw Hat Cooperative Corp. who was brought on board in January to encourage rapid growth.”We also offer a great opportunity to take the family for dinner at an affordable price at a time when families are cutting back on their discretionary spending. This allows them to have something fun and affordable to look forward to..Fornaci says the company's pizza restaurants are geared to the nuclear-family demographic of parents and children, as well as gatherings of youth sports groups, business lunches and hot, fast delivery.
Looking for a Slice of Success? Consider The Straw Hat Recipe
There are several lessons for success that can be gleaned from the Straw Hat growth spurt for others to consider as impetus to take the franchise plunge:
1. Straw Hat is in growth mode. The chain, which celebrates its 50th anniversary this coming year and is known for its “signature” genuine California pizza, offers the enticement of being on board with a winner. It’s a brand prospective franchise owners may want to invest in because unlike many franchises, locations are not too close together eliminating the threat of brand saturation.
2. Serving up an American food staple. Nothing says American food consumption quite like pizza. A recent Gallup Poll shows children ages 3-11 prefer pizza over all other foods for lunch and dinner. And, Parade Magazine reports that 94 percent of the population of the U.S. eats pizza. As the country gets pinched by a recession, pizza is a product unlikely to go under in a downturn. At Straw Hat, a family of five can come in and dine on a large pizza, appetizer platter and five sodas for less than $30. Also, pizza is easy to prepare and yield‘s a relatively high profit margin.
3. Solid History. In bad economic times, it’s a good idea to focus on a tried-and-true brand and not a good idea to hop onto anything that looks like a fad. In its 50 years, Straw Hat has gained public recognition and has a proven track record. Being an established franchised system and independent franchisee organization it offers invaluable assistance and advice to prospective owners.
Hot new concepts are great, but there is no evidence or track record to show how the business will do on an economic roller coaster. Straw Hat prospective owners can look at the value these community-based hubs have brought for more than five decades, especially their value in hard economic times – a place for townsfolk, families and sports teams to gather to have a good time at a low cost.
4. Offering Job and Career Opportunities. Recessions intensify corporate lay-offs, making franchise ownership an attractive opportunity for those seeking new jobs and income.
5. Brand-specific advantages of a Straw Hat Franchise:
• Traditional restaurant franchises charge between 10 to 12 percent royalty and advertising fees. Straw Hat charges significantly lower royalty and advertising fees.
• Straw Hat also does not mark up the cost of food; it is sold at the same price to franchise owners.
• Franchise fees are $25,000 and the average initial investment to open one unit ranges from $200K to $500K for a Straw Hat Pizza or Grill and $100K for a Straw Hat Express.
• Straw Hat works with local banks and financing companies to help franchisees find SBA loans.
• Average pizzeria size: 3,500 to 5,000-sq.ft. for a Straw Hat Pizza or Grill.
• Average Express Size: 1,200-sq.ft.
About Straw Hat Pizza Franchise, “a most cooperative franchise.”
Franchisees pay royalties to the franchise and in return, receive marketing materials, advertising, operations and quality control support, significant deals with suppliers, and ingredients and packaging manufactured by Straw Hat Pizza.
Each franchisee has a real say in his or her company’s future. The Franchise was recently awarded the prestigious seal of Fair Franchising by the American Association Franchisees & Dealers (AAFD) and awarded “hottest franchise” by America’s Hottest Franchise.
Founded in 1959, Straw Hat Pizza is the originator of "Genuine California Pizza," and is comprised of numerous locations in the Western United States. We’re poised for rapid growth in the United States and Canada. Plans call for a total of 100 pizzerias and Grills in 2010, which more than doubles the existing operations today.