CiCi’s Pizza Buffet’s Cheap Thrills
CiCi’s Pizza Buffet’s challenge: to keep prices low and service levels high, all while steadily expanding.
By Lisa Bertagnoli, Contributing Editor -- Chain Leader, 10/1/2007
 CiCi’s CEO and President Craig Moore joined the chain as a district manager in 1993. Franchisees give Moore and his team credit for raising CiCi’s profile.
For more information about CiCi's To Go concept, read "CiCi's Fine-Tunes To Go." |
Lots of executives at CiCi’s Pizza Buffet like to tell the story about their first time.
For Tom Koenigsberg, it was back in 1992 when he was working in marketing at now-defunct Tia’s Tex-Mex in Dallas. He, his wife and their two young children went to a CiCi’s in Plano, Texas, for dinner. The dinner, he recalls, cost $13.77.
He remembers the service even more vividly. Skeptical of the low prices and looking for a catch, or what CiCi’s calls a "gotcha," Koenigsberg decided to make CiCi’s deliver on its promise to prepare a special-order pizza for guests. He ordered a triple-meat pie, and six minutes later, the manager brought it to his table.
Pleased but puzzled, Koenigsberg asked the manager why he would go to such trouble for a first-time guest. "Because," the manager replied, "I want you to be my customer for life."
Koenigsberg, who joined CiCi’s as chief marketing executive three years ago, now fully understands why the manager was so intent on making that pizza for him. "Without service," Koenigsberg says, "we’re just another pizza place."
Mass Plus Class
It’s this mass-class combination of Costco-type prices—lots of food, not a lot of money—and Nordstrom-style service that CiCi’s must maintain as it expands throughout the United States. Now at 660 units in 30 states, CiCi’s plans steady growth of 75 to 100 units a year; past years have seen unit growth ranging from 50 to 80 units.
"This concept is hard to operate," says Craig Moore, president and CEO of Coppell, Texas-based CiCi’s. Not product-wise, due to its limited menu of pizza, salad, dessert and soft drinks, but from that service point of view. Customers, at first skeptical of the low prices, look for the "gotcha," so all stores must be on their game, all the time.
Staffers must deliver a three-fold service formula: Be glad to see guests, take care of them during their visit, then bid them thank you and goodbye. Kitchens must always be fully stocked so as not to disappoint guests in the mood for, say, a pineapple-and-anchovy pizza. "There’s no such thing as being out of product," says Bob Kulick, president of JMC Restaurant Distribution, a separate company that all CiCi’s franchisees use for product and equipment, even though they don’t have to.
The Cost Crunch
CiCi’s competes in the rock-bottom price category, catering to the "need" guest, young families with children ages 2 to 13. "We compete with the $6 meal," Moore says.
Given that positioning, CiCi’s must maintain its low price point—no small feat, according to Moore.
Wages and insurance have "gone through the roof," he says. Rents in most CiCi’s markets, once around $13 per square foot, now hover at $20. To offset rising rents, the chain is experimenting with a 3,500-square-foot building, compared to its current 4,200-square-foot model. CiCi’s also has developed To Go, a 1,000-square-foot concept that offers only takeout and catering. CiCi’s began franchising the concept, now at eight units, a year ago; the company is still fine-tuning operations and devising a marketing strategy for the To Go concept.
In addition, cheese prices are at a four-year high. As a result, food costs are 30 percent when they should be 27 percent, Moore says. A nine-month cheese contract has helped with pricing.
Still, CiCi’s is taking a dollar price hike, measured over the course of a year. Last April, the buffet price increased to $4.49 from $3.99.
This September, the price jumped to $4.99, but not everywhere: Markets are tiered according to the area’s cost of doing business. First-tier markets can charge up to $4.99; second-tier, $5.49; and third-tier, up to $5.99 for the buffet.
Even though CiCi’s may dominate the low-price, dine-in pizza market, it still faces plenty of competition, according to Darren Tristano, executive vice president at Technomic Inc., a Chicago-based restaurant research firm. "Pizza is a very popular menu item," he says.
Chains such as Papa John’s are carving out a quality niche. And "delivery and takeout is still very popular," Tristano says. A flurry of fast-casual chains, among them Go Roma Italian Kitchen and RedBrick Pizza, serve pizza in a fetching atmosphere. CiCi’s bare-bones decor is not unpleasant, but it’s not exactly fetching, either. Quick-service sandwich chains, including Subway and Potbelly Sandwich Works, serve pizza-like sandwiches. Noble Roman’s sells pizza at convenience stores. As if that’s not enough, grocery stores, both upscale and midscale, and warehouse clubs are peddling take-and-bake pizza.
"The increased competition could be a hindrance" to CiCi’s growth, Tristano says. So could a substantial price hike: "If they have to raise the price to $5.99, $6.99, that could be an issue," he says.
A Higher Profile
One way to preserve that price point is to increase sales. To do so, this past spring the chain launched its first national ad campaign, which boosted sales and interest from potential franchisees. This summer, CiCi’s brought "Guest First Fever," an energize-the-troops road show, to 11 markets, with positive results. It’s also testing items such as tossed salads, Buffalo wings, and beer and wine in select markets.
Credit for these innovations belongs to CiCi’s management team, which bought the concept in 2003 from founder Joe Croce. Croce, who’s no longer involved in the company, opened the first CiCi’s in 1985 in Plano, Texas, an upscale Dallas suburb then known for its high teen-suicide rate. Now it’s known for its ethnically diverse population.
Croce’s ownership style? "Under the radar screen," says Moore, whom Croce hired as a district manager in 1993.
Here’s Moore’s first-time story: He ate at a CiCi’s to prepare for his job interview with Croce. "It was like the staff knew I was interviewing," Moore says. "They kept checking on me." The service level, according to Moore, is so compelling that 90 percent of franchisees first come to CiCi’s as customers, and 40 percent of franchisees were once CiCi’s general managers.
The ownership team is composed of 11 CiCi’s executives, among them Moore, Kulick, Chief Financial Officer Forbes Anderson and Director of Real Estate Bob Parent. Oncap L.P., a Toronto-based private-equity firm, is also a partner in the company. CiCi’s will neither divulge exact ownership stakes nor release financial data other than annual sales.
Management does its part to keep overhead low and generate new revenue. "We’re in the pennies business," says Anderson, who joined the company in 1997. One example: JMC offers backhauling services to other companies; this year, backhauling revenue will account for 5 percent of JMC’s $150 million in sales.
Another example: The five executives on the 22-day Guest First Fever tour this spring spent $16,000; that works out to a per-diem of $145 a day, airfare included. The crew stayed at $50-a-night hotel rooms, rented only one car per city, and ate most meals at CiCi’s. The program itself, a video presentation and in-store materials, cost about $50,000.
Marketing Magic
According to one franchisee, the management team’s signature to date hasn’t been cost-cutting; it’s been adding marketing sparkle to a company formerly operations-driven. "When I joined the company, sales were, like, a negative 7 percent," says Pat Williamson, co-chair of PALS Pizza, a Dallas-based company with six Denver-area CiCi’s. "They never talked about sales. They talked about operations."
Williamson, former Pizza Hut chief operating officer, didn’t need to visit CiCi’s before becoming a franchisee in 2001—a peek at another franchisee’s P&L sheet did the trick. "If you can generate a million dollars with this concept, you can make a lot of money," he says, adding that all his stores are at that sales mark.
Guest First Fever, a four-hour motivational conference offering presentations by CiCi’s top management, lifted secret-shopper scores to 91.5 percent from 89 percent, where they had languished for years.
The chain’s first big national ad push, featuring a TV commercial called "Delicate Flower," also struck gold: Sales in April jumped 18 percent. "Phenomenal," Williamson says of its effect on his stores. During the campaign, CiCi’s Web site, accustomed to 200 hits per day, crashed as hits soared to 5,000 per minute when the ads aired. The overflow, and continuing strong Web site traffic, forced CiCi’s to outsource its server.
Yet another marketing change: moving from "soft" openings to festive grand openings for new stores. The change has boosted unit volumes to nearly $1 million from $800,000, Moore says.
Easy Does It
Williamson, who signed a 47-store franchisee agreement, is confident that CiCi’s will be able to maintain both its service niche and price point. Still, as he prepares to open two more stores this year and four next year, he wishes the concept would grow more aggressively. "There should be 2,000 CiCi’s, not 600," he says.
Moore’s response? "We won’t get to 2,000 stores in three or four years," he says. CiCi’s plans to stick to 75 to 100 new retaurants a year, focusing on franchisees with a handful of stores, not mega-franchisees like Williamson.
In addition to boosting sales, the national ad campaign sent the franchisee phone line a-ringing; the chain expects 10,000 inquiries this year, up from about 7,500 last year. Of those 10,000, about 40 will end up with stores; the tryout includes working in a store for several days so CiCi’s executives can see prospective franchisees handle staff and guests.
"Can we grow faster if we weren’t as strict? We could, but those are the kind of things that catch up with you," Moore says. "We all make mistakes, but you make fewer if you do the work on the front end."
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