When Chris Britt and Ed St. Geme worked with Levine Leichtman Capital Partners to acquire Mountain Mike’s Pizza in 2017, they knew full well that the private equity group would want out of the business by now.
That is what private equity is for, after all. Get a return after a few years and move onto something else. But Britt and St. Geme knew they found something special in Mountain Mike’s and they wanted it for a lot longer. That’s why they included a provision giving them the right to buy out Levine Leichtman by now, assuming they met certain parameters.
“In private equity it’s buy, build, sell, buy, build, sell,” Britt said in an interview. “As long as you’ve got partners, you can build winners. But we didn’t want to sell the winners. I wanted to keep building the winners.”
“We look at this as a lifetime asset,” he added.
Britt and St. Geme will get their chance. The company’s two co-CEOs bought out Levine Leichtman this week, giving them ownership of a brand just as they plan to speed growth. “We definitely enjoyed the partnership,” Britt said. “The company has performed well and is successful. But our interest has always been longer-term. Now it’s time for the next era of Mountain Mike’s.”
Britt and St. Geme operated 43 Burger King restaurants between 2004 and 2014. They were looking for another opportunity when they saw Mountain Mike’s was on the market.
Mountain Mike’s has been something of a sleepy brand. The brand was founded in 1978 in Palo Alto, Calif. It serves mostly pizza in a family-friendly atmosphere. Britt and St. Geme were clearly familiar with it—they used to go to the chain’s first location, back when they attended Stanford together.
The pair saw a brand with serious potential—“national brand” potential, Britt said. For one thing, it had the product. “It’s just a fabulous pizza,” Britt said.
But Mountain Mike’s also was not prepared to fulfill that potential.
“It had no franchise organization to speak of,” Britt said. “It didn’t have a traditional setup. It didn’t have operations or marketing. It was a family business run by a gentleman who was smart.”
Britt and St. Geme partnered with Levine Leichtman on a buyout, with the private equity firm owning half of the business and the two co-CEOs getting an option to buy later. They then got to work filling in some of the brand’s blanks.
They brought in a chief operating officer from Yum Brands, Jim Metevier, and built out their executive team. They also had to start capturing data the company didn’t collect in the past, such as same-store sales.
“We had to rebuild all that data to create a foundation to be able to report,” Britt said. “We also had no team. It was just me and Ed and an administrative assistant who is now our restaurant development manager.”
Mountain Mike’s is fully franchised. But most of its growth came from existing franchisees, which is impressive but ultimately slowed long-term growth. Under the new owners, the brand built its sales team. The chain had about 170 locations in just one state in 2017. Today it operates 245 locations in eight states.
The company also started focusing on sports. Mountain Mike’s reached a deal with the NFL’s San Francisco 49ers to be the team’s official pizza. It has plans for future sports partnerships. And the company is putting more marketing dollars into the brand through paid social and digital advertising.
The brand also established its digital platform. It introduced a loyalty program on its mobile app and improved its mobile web offering. It also embraced third-party delivery. Digital orders went from 10% of total sales to more than 40%. For the company, about $100 million of the chain’s $250 million in system sales came from digital channels.
While the company had a substantial dine-in business, most of it was carryout and delivery going into the pandemic. That helped carry the chain over the past couple of years. Dine-in “went to zero, except for some outside patio dining still happening,” Britt said. “But the dramatic growth in takeout and delivery more than offset the loss of dine-in sales.”
Same-store sales rose 7.3% in 2020. Last year they rose 15%. Over the past two years, total system sales have risen 37%. Not bad for a 43-year-old brand. “We have tremendous momentum,” Britt said. “We’re no longer the best-kept secret in pizza.”
Yet the pandemic also led a lot of customers to give the chain’s pizzas a try. That has helped fuel the brand’s growth.
To be sure, the co-CEOs understand how difficult it will be to replicate sales numbers from the past two years.
At the same time, they believe they’re on the cusp of faster growth. They are attracting more sophisticated operators and are opening new markets. And existing operators are still adding new units. The company expects twice as many openings this year as any in the chain’s history. “The best is yet to come,” Britt said.