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Pizza Is Pressing Burgers for No. 1 : Big Chain Outlets Are Mushrooming All Over Nation

September 22, 1988|PAUL FARHI | Washington Post

WASHINGTON — Forget the burger wars, the cola wars, the beer wars. The hot battlefront these days is down at your neighborhood pizza parlor.

Driven by the proliferation of chain outlets, especially those that deliver directly to the too-tired-to-cook crowd, the pizza business is gaining on hamburger outlets for supremacy in the franchised fast-food business.

Competition has become so thick in recent years that some see a shakeout coming. The latest sign of the times: top management at Omaha-based Godfather's Pizza Monday announced that they had completed a leveraged buyout of the company, the nation's fifth-largest pizza chain, which former owner Pillsbury Co. had spent three years trying to turn around. Terms of the deal were not disclosed.

Under Pillsbury, Godfather's shrunk by about 300 units, to a total of 542, while its sales declined by 27% over the past three years, to $250 million. Chief executive Herman Cain, who led the buyout, said Monday that his immediate goal was to "stabilize" the company.

That makes Godfather's the exception among major pizza companies; most have been on an expansion binge in recent years. PepsiCo's Pizza Hut, the industry leader with 5,600 outlets, has added 1,000 units since 1985, and has seen its sales soar from $1.8 billion to an estimated $2.8 billion. No. 2 Domino's--which pioneered the home-delivery market--has nearly doubled its size to 4,148 locations and will generate about $2 billion in sales this year, more than triple its 1985 volume. The most spectacular gains have been recorded by the Michigan-based Little Caesar's chain, which had 720 units and $175 million in sales three years ago. In 1988, the No. 3 company is expected to generate $1 billion through 2,375 restaurants.

According to Restaurant Business magazine, total revenue for franchised pizza stores grew 123% between 1982 and 1987, to $4.95 billion, with another 14% growth spurt expected this year. During this same period, the number of franchised pizza units grew by 73%.

By contrast, after a long head start, the hamburger market is growing more slowly, a result of saturation. Revenue generated by franchised burger outlets grew 49%, to $22.8 billion, between 1982 and 1987, and the number of franchised stores grew only 23%.

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