Where are you, Dr. Phil? The week has been a stormy one in the relations between various restaurant parties. Chairs weren’t thrown, but a few heads were snapped left or right by developments worthy of a soap opera soundtrack.
Crusts fly in the pizza market
The segment has always been one of the less civil markets in food service, with the major players constantly hacking at each other through price wars and trash talk about crappy ingredients. The last week or so has been less of a hockey playoff and more of a mind game, with two smaller contenders seated at the chessboard.
Noble Roman’s all but insulted Papa Murphy’s mama when it revealed a new service program to investors, citing the don of take-and-bake by name. Roman’s explained that it was tweaking its own take-and-bake concept this week to outflank the segment leader in customization. Three Noble Roman’s Take ‘n Bake P’Za outlets are being outfitted with portable ovens so they can feature a service called “You Bake or We Bake.” Customers can either take home a made-to-order uncooked pie, as per the usual, or pay $1 more and have the pizza baked for them.
The availability of hot pizza should boost the stores’ lunch business, Noble CEO Paul Mobley explained to investors. If so, the either/or service would be rolled into the 22 P’Za units that are already in operation. Thirty-three more are in various stages of development.
‘He didn’t show, he didn’t call, he didn’t write …’
One of those stores will not be a unit inside a Kangaroo Express c-store. Kangaroo’s parent company, The Pantry, agreed two years ago to install a P’Za as a test vehicle for the rest of the chain. Lengthy discussions followed in the office of The Pantry’s CEO, Mobley explained. The day after one of those visits, the CEO was fired, he recalled. “They're now on their third CEO since then,” he said, “so they have not been going forward with anything.”
He did not sound disappointed.
More than the sauce is red
Meanwhile, new disclosures about Papa Murphy’s past could complicate the pizza maker’s courtship of investors. Although the brand is widely recognized as the leader in take-and-bake, documents filed for an initial public offering show the franchisor has not generated a profit for its last three fiscal years. Murphy’s net loss deepened to about $2.6 million in 2013 on revenues of $80.5 million, according to the filing. That compares with a loss of just over $600,000 for 2011.
The top line yields better news for would-be stockholders. Revenues increased by more than 20 percent from 2012 to 2013, and comparable store sales for last year grew 2.8 percent.
Papa’s other family
The filings also indicate that Murphy’s will grow more than just its namesake brand. In December, the take-and-bake concept’s private equity owner bought a minority stake in Project Pie, an entrant in the crowded better-pizza market, for $2 million. With Lee Equity Partner’s sale of Murphy’s to the public, two-unit Project Pie will apparently become the take-and-bake operation’s charge. Additional stores are already scheduled to open this year, according to the documents.
Listed as helping in the rollout are some high-pedigreed “advisors,” including Cinnabon President and longtime Hooters executive Kat Cole, and headhunter extraordinaire Alice Elliot. The filing did not specify what role they would play, nor how Cole can serve Project Pie without straining relations with her employer, the franchise holding company Focus Brands.
Papa Murphy’s description of Project Pie puts the concept squarely in the pack of fast-casual pizza concepts like PizzaRev, Blaze and Pie Five. The concept promises to custom-prepare pies and bake them in less than five minutes.
Mucho moola and a dry Molto Mario
Despite the influx of yet another powerful challenger, better-pizza concepts certainly have fewer competitive worries right now than does the don of New York’s Italian food scene. Clearly Mario Batali and the State Liquor Authority of New York are taking to the mattresses.
A site called Dr. Vino reported yesterday that Batali and longtime business partner Joe Bastianich are facing the possible loss of restaurants’ liquor licenses for six months. That means no vino could be served in Del Posto, Babbo, Otto, Lupa or the original U.S. outpost of Eataly, to name a few of the partnership’s holdings. A $500,000 fine is also a possibility, the Dr. said.
The Liquor Authority plans to grill the pair at a hearing next week on several suspected, technical violations of the regulations governing licensed establishments. For instance, rules intended to avert a return to pre-Prohibition conditions forbids alcohol suppliers from running establishments that push their own hooch. Bastianich owns an Italian vineyard and wine importing business.
There are also accusations of a “false material statement” being filed by Batali & Bastianich Hospitality’s various restaurants. It’s not clear if the alleged infractions are independent of the interlocking-interest charge, or if those charges address the company’s assertions that interlocking interests didn’t exist.
The hearing is set for March 25.