Maybe consumers have had enough of pizza. Maybe it just wasn’t a lunch thing. Perhaps it’s the prices or the pandemic. Maybe the concepts expanded too quickly. But for whatever reason, the fast-casual pizza trend just never reached its promise.
This was clear long before word came out that MOD Pizza, which heretofore had been the shining star of the burgeoning business, was considering a bankruptcy filing.
The fast-casual pizza sector emerged after the Great Recession, promising to give consumers a reason to get pizza during their lunch break at work.
The industry and its investors could not get enough of the sector a decade ago. The concepts promised individual-sized, customizable pizzas, largely catering to a dine-in lunch crowd.
Pizza Inn turned an express concept into a fast-casual pizza brand called Pie Five and then furiously sold that brand to franchisees.
Buffalo Wild Wings, meanwhile, jumped in with an investment in PizzaRev, when it had just three locations. Several other investors, including the founders of Wetzel’s Pretzels, created their own concepts, hoping to ride the wave. The concepts attracted massive investment dollars and the brands grew rapidly and attracted gushing media that dubbed them the “Chipotle of pizza.”
The idea, at least in theory, had some legs. Pizza was ubiquitous. But it was not readily available during the lunch hours. And the fast-casual sector had taken over plenty of other menu items. Meanwhile, high-quality local concepts did just fine.
To be sure, MOD and Blaze remain large-sized chains. But many of the players flamed out quickly, notably PizzaRev, which struggled going into the pandemic and closed many of its restaurants. It is down to just a single unit.
Pie Five, meanwhile, is down to fewer than 30 locations. It is now back to focusing on its pizza buffet concept.
The chains remaining in the sector averaged system sales growth of 2.2% in 2023, according to data from the Technomic Top 500 Chain Restaurant Report. The fast-casual sector averaged 7.9%. Pizza underperformed every other menu type among fast-casual chains last year.
That actually reflects broad weakness among pizza chains overall. Fast-food pizza chains averaged just 3.5% system sales growth last year. The pizza sector may simply be saturated. And consumers have an awful lot of options at the grocery store or Costco or Sam’s Club or even convenience stores like Casey’s.
Takeout is a huge reason for the sector’s challenges. Consumers even before the pandemic were shifting more of their restaurant visits to takeout and delivery. And fast-casual pizza was built for the dine-in consumer. The sector has struggled to make that transition.
The first sign that this sector wasn’t quite there came before the pandemic, when Blaze Pizza started testing larger “shareable” pizzas, vowing to take on more traditional pizza players.
The pandemic certainly hasn’t helped, either, by pushing consumers even further toward takeout.
But it also led to a dramatic reconfiguration of the lunch business upon which chains like MOD and Blaze were built. The brands concentrated on locations near commercial areas with plenty of lunch business. But with more workers staying home, and downtown and urban areas simply not that busy during the noon hour, that lunch business just isn’t there at many of these locations.
The lack of demand is evident in the unit volumes of these restaurants. The typical fast-casual pizza chain generates just $1.2 million in average unit volumes. By contrast, chicken chains average $2.4 million and Mexican chains $2 million.
Unit economics are important, because they help a concept weather high-cost environments like the one we saw over the past couple of years.
At the end of the day, maybe pizza just isn’t for lunch. Especially when so many employers are now ordering pizza delivery at lunch to lure workers into the office again.