On the back of yesterday’s announcement that MOD Pizza is to launch in the UK in partnership with Sir Charles Dunstone, M&C looks back on the talk co-founder Scott Svenson gave at last year’s Restaurant conference. Svenson touched on the state of the US pizza market, the story behind MOD – its development, ethos and people-led culture – and why he believes there is an opportunity to modernise the pizza industry in the UK.
In the past if you were interested in consuming pizza outside of your home, the experience generally required an investment of time and money. Most quality pizza was delivered in full service restaurants at full service restaurant prices. MOD asks people to create a totally individualised, artisan-style, 11inch thin crust pizza or hand tossed salad all at one compelling price. You get exactly what you want using any combination of our 30 toppings for no additional charge.
In Seattle, we sell our pizzas for $7.47 (c£4.50). The experience is fast. From the moment you engage with our team to the moment you receive your pizza is generally five to six minutes. The speed is enabled by our use of gas-fired display ovens which cook our thin-crust pizzas at about 700 degrees in two to three minutes. The experience is delivered in a very cool, high energy 2,200sq ft to 2,800sq ft store by a team of very passionate and engaged “MOD Squad” members. Artisan pizza and hand tossed salad made just the way I want it and super fast with incredible value delivered in style and with a smile – that is MOD Pizza.
The story of MOD started in London. My wife Ally and I spent 11 happy years from the late 1980s living in London. While we were here we had the pleasure of helping build two companies – The Seattle Coffee Company and Carluccio’s. As two ex-pat Americans we yearned for the west coast style coffee we had grown up with in Seattle and popularised by Starbucks. After many years of complaining and some encouragement from good friends we decided to launch our own coffee company. After a hectic two and half year period we built 65 locations in the UK, with partners openings additional stores in South East Asia, South Africa and the Middle East. In 1998 we were approached by Starbucks and we sold our business providing them with a launch pad into the UK, Europe and Africa.
During that time I was also lucky enough to meet the founding team behind Carluccio’s. We became their primary financial backers and over the next 11 years, we worked with them to build the Carluccio’s brand. I can’t say enough about the good times my wife and I had while living in the UK. We met an amazing group of people and worked with amazing teams.
We moved back to Seattle in 2000 to raise our four boys. Having been spoilt by our experiences building Seattle Coffee Company and Carluccio’s we were hesitant to start another concept. How could we improve on the experiences we had in London? We didn’t hold out much hope until someone suggested we take a look at the US pizza industry.
We have had a love affair with most things Italian, for most of our lives. During our years in London we would escape to Italy at every opportunity. So the idea of exploring the world of pizza held some allure. What we found surprised us. While categories such as coffee, burritos, Asian and even Mediterranean had exerpienced significant innovation, pizza has lagged behind. Other than the advent of delivery, the emergence of local, chef driven pizza restaurants and the rise of California Pizza Kitchen, the middle part of the US pizza market has remained very uninspired and dominated by a few legacy brands.
The US pizza industry is big, at $37bn of sales it represents almost 8.5% of total spending in US restaurants. One in eight Americans eats pizza everyday, while the average American eats pizza 3.4 times a month. While the industry is dominated by independents, four legacy brands control 44% of total pizza sales in US restaurants. Outside the pizza sector restaurant innovation has mirrored the incredibly successful emergence of the fast casual category, led by Chipotle. Nothing brings to life the contrasting fortunes of the legacy pizza market and the fast casual category better than a comparison of recent comparable sales performance. With over 1,500 locations, Chipotle has been on an absolute tear. In contrast, Pizza Hut with a market share of over 16% has seen its sales declining.
So why not combine the customer experience of fast casual with the second most popular food category in the US. Not ground breaking insight, but we soon realized that no-one else was doing it. We pulled together a group of collaborators and got to work building a concept. Our first store opened in the height of the financial crisis and became our laboratory to figure out if we could make this work. In our second year, we opened three more stores and then three more the year after. At about that point we realised we were on to something. And as we quickly learnt, so did a whole buinch of other people. In 2011, a couple of concepts opened in Los Angeles that were remarkably similar to MOD. Within a year, additional concepts were popping up across the US and by 2013 this had become a flood.
While we have stopped tracking new entrants coming into our space at the last count we identified north of 30 brands that were going after the fast pizza market. Many are one offs that will only open one or two sites, but there are legitimately five or six brands that are trying to become national in the US right now.
What sets MOD apart and why we will be the winner of this race to become the leader of the quickly emerging fast pizza market? Our answer to that is quite simple. We define success differently than most of our peers and feel we are running in a different race. Most of our competitors were quick to realise that there is a fundamental shift taking place in the US pizza market. To be honest, some of them saw the full scale of the opportunity quicker than we did. To capture market share most of them have chosen to pursue a franchise model, very few of them have opened company stores. In many cases growth and market share has become their primary objective, everything else has come second.
At MOD we have decided to define success differently. Back in 2007, when we set off on this adventure, my wife and I sat down and asked ourselves the question: If we were going to dedicate the next chapter of our lives to building a chain of pizza restaurants, what would make the journey a success for us? Given our previous experiences in the UK with Seattle Coffee Company and Carluccio’s, the bar was pretty high. The answer that emerged for us had nothing to do with the number of stores we opened or the matter of value we could create. What emerged for us was a vision to use pizza as a platform to make a difference in the lives of the people who worked at MOD and in doing so hopefully changethe way fast-food is perceived as an employer. Our focus became caring for and inspiring our teams. We felt that if we did this well, we were confident that our teams would in turn take care and inspire our customers. It is a simple model but is one we hope will inspire others to follow the same path.
When we were designing the concept the two questions we asked ourselves were how much can we pay our employees and how low can we set the price for our product? Being purpose driven has not only provided Ally and I the inspiration to fully commit ourselves to building MOD it has also provided a spark to engage our store-level teams to make an emotional commitment to the company. Is it the culture that is emerging as a result that we believe will be our true differentiator in the long term.
We realise that being an employee-centric company that is focused on building a culture that inspires exceptional service is not enough to win in this space. To accomplish our longer term goals we need to build not only the best concept but the strongest business in the sector. Fortunately we have put in place the foundations to accomplish that, including building a world class team; having an all-star group of shareholders; a strong balance sheet with no debt; clean, credible and consistently amazing food; and inspiring store environments.
So what does the future look like for MOD? In a word hectic. The pace of our growth, while aggressive, reflects the fact that our sector is developing very quickly in the US and we believe there is a first mover advantage to be in key markets in the US. While most of our growth will come through company stores, we are selectively adding partners to help us grow into selective markets in the US.
So what am I doing here given the aggressive growth and plans we have in the US? Amidst that growth we are considering expanding into a few key international markets. Given our focus on the US, any growth we pursue internationally will be with strong international partners. For the past 10 years , Ally has been pestering me to find a way to come to the UK. So if we are going to expand outside the US, why not consider a return to the UK? That is the question we are here to explore.
What’s is my take on the current UK pizza market? It was great to see the team at Pizza Pilgrims earlier today, I walked by one of their stores and it was very impressive. Obviously PizzaExpress is a fabulous brand, but like in the US, I believe there is an opportunity to modernise the pizza industry here.
