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U.S. Pizza Restaurant Industry Robert Carroll Carrie Esch Cara McGarry

Pizza Industry

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Page 1: Pizza Industry

U.S. Pizza Restaurant Industry

Robert CarrollCarrie Esch

Cara McGarry

Page 2: Pizza Industry

Background

Page 3: Pizza Industry

Historical Background

4The lower class of Naples, Italy is believed to have created pizza in today’s familiar fashion

8The first pizzeria opened in 1830 in Naples, Italy--it’s still in business today

8Pizza made its way to the inner cities of the United States, New York and Chicago most notably, in the early 1900s thanks to the large population of Italian immigrants

8American soldiers further prompted the dish to become very popular at the end of World War II, having been exposed to it while serving on the Italian front

8Today’s largest pizza chains (Pizza Hut, Domino’s Pizza & Little Caesars) began popping up all over the U.S. in the late 1950s, early 1960s

Source: www.aboutpizza.com/history.php

Page 4: Pizza Industry

Traditional Crust Pizza: The crust is not too thick and not too thin. Usually it is created by rolling the dough into a round circle then topping it with sauce and cheese.

Deep Dish Pizza: A thick crust and dense toppings usually characterize deep-dish pizza, also known as pan pizza.

New York Style Pizza: The crust of this pizza tends to be much thinner than traditional and deep dish.

Traditional Types of Pizza

Source: www.aboutpizza.com

Page 5: Pizza Industry

Four Channels of Distribution

• Sit-Down Dining - custom pizzas made for in-restaurant dinersTypical Pizza Restaurant Establishments: Pizza Hut Red Roofs, Independents

• Delivery - custom pizzas made, baked and delivered by restaurant personnel to call-in customers

Typical Pizza Restaurant Establishments: Domino’s Pizza, Pizza Hut, Papa John’s

• Carry Out - custom pizzas made and baked for walk-in or call-in customers to pick up

Typical Pizza Restaurant Establishment: Little Caesars

• Take ‘N Bake - custom pizzas made for walk-in customers who then take the pizza home to bake themselves at their own convenience

Typical Pizza Restaurant Establishment: Papa Murphy’s

Page 6: Pizza Industry

Aggregate Industry

Information

Page 7: Pizza Industry

U.S. Restaurant Industry

$399 billion

U.S. Fast Food Industry

$135 billion

U.S. Pizza Restaurant Industry

$29.4 billion

2001 Industry Data

U.S. Pizza Restaurant Industry

Page 8: Pizza Industry

U.S. Pizza Restaurant Industry

4 63,873 pizza restaurants in the U.S.4 4,233 new restaurants opened and 4,300 restaurants closed between July 1,

2001 and July 1, 20024 Less than 30,000 pizza operators own all of America’s 60,000+ pizza stores4 One pizza store for every 4,330 U.S. residents

4 Pizza restaurants make up approximately 7.7% of the nation’s total restaurants

4 Industry sales for pizza were up 1% for 2001, which gave the pizza industry overall sales of $29.4 billion4 Total pizza market is projected to grow by 17% by end of year 2003

4 Pizza is the only food category to show consecutive growth for the past 20 years

Source: www.pmq.com/mag/2002summer/pizza_power.shtml www.pizzaprosperity.com/stats.htm www.pmq.com/pizzastorecensus.shtml

Page 9: Pizza Industry

Chains vs. Independents

Independents4 Independent restaurants own 59.48% of all pizza restaurants (37,992 restaurants)4 Average unit sales was $366,720 per year between June 2001 and May 20024 Sales represent 47.38% of the industry’s sales4 Independent operators holding ground in the North East portion of the U.S.

Chains4 Average unit sales for the top 25 pizza chains increased to $598,000 to $583,000

the previous year4 “The Big Four” pizza chains (Pizza Hut, Domino’s Pizza, Papa John’s and Little

Caesars Pizza) represent 36.8% of industry sales at $10.81 billion4 Pizza Hut, Domino’s, and Papa John’s represent a larger % of the industry total

sales than they do industry total stores

Source: www.pmq.com/mag/2002summer/pizza_power.shtml Pizza Today, August 2002 www.pmq.com/pizzastorecensus.shtml

Page 10: Pizza Industry

American Pizza Stores Per Capita

No. of Pizza Store Per 10,000 Population

Source: www.pmq.com/pizzastorecensus.shtml

Page 11: Pizza Industry

2002 Year-End Sales Trend

-8%

-6%

-4%

-2%

0%

2%

4%

51&52*504948&47*46454443

QSR P izza QSR Sandwich

QSR Specialty Midscale Family Style

Midscale Specialty

Source: SalesTrac® Weekly

QSR Pizza: • Domino's • Mazzio's • Papa Gino's • Papa John's • Peter Piper Pizza • Pizza Hut • Pizza Inn • Round Table Pizza •

Weeks 43 through 52 - 2002

Page 12: Pizza Industry

Competition

Page 13: Pizza Industry

U.S. Market Share: $29.4 billion

Independents

Pizza Hut

Domino's Pizza

Papa John's

Little Caesars

All other chains

Source: www.pmq.com/mag/2002summer/pizza_power.shtml

Independents47.38%

PJs5.94%

All other Chains15.85%

Domino’s9.58%

Pizza Hut17%

Little Caesars4.25%

Page 14: Pizza Industry

U.S. Share of Pizza Stores 63,873 stores

Independents

Pizza Hut

Domino's Pizza

Papa John's

Little Caesars

All other chains

Independents59.48%

PJs4.05%

All other Chains12.05%

Pizza Hut12.08%

Little Caesars

4.8%

Domino’s7.54%

Source: www.pmq.com/mag/2002summer/pizza_power.shtml

Page 15: Pizza Industry

Top Chain Growth Trends

-6

-4

-2

0

2

4

6

8

10

Qtr 1 '01 Qtr 2 '01 Qtr 3 '01 Qtr 4 '01 Qtr 1 '02 Qtr 1 '02

Domino's

Pizza Hut

Papa John's

Source: www.dominos.com www.yum.com www.papajohns.com

Page 16: Pizza Industry

Company Synopsis

Stores 7,100 3,400 2,800 12,200 *% Franchised Most 80% 75% 80%Public/Private Private Private Public PublicHeadquarters Ann Arbor Detroit Louiville LouivilleCEO David Brandon Michael Iiitch John Schnatter A. PearsonEmployees 12,600 90,000 ** 16,336 210,000 **2001 Sales $1,258 $600 # ** $971 $6,953 **International Yes Yes Yes YesInternet Ordering No Yes Yes Yes

Additional Products Breadsticks Antipasto Breadsticks Breadsticksother than Pizza Buffalo Wings Salad Cheesesticks Buffalo Wings

Cheesy Bread Cinammon Sticks Chicken TendersBuffalo Chicken Kickers Crazy BreadCinnaStix Italian Cheese BreadDots

* Pizza Hut specifically** includes all subsidiaries not just the specific Pizza Subsidiary# 1999 Sales

Page 17: Pizza Industry

Top Chain FinancialsDecember-01 Dominos Little Caesar's Papa John's Yum! Brands

(llitch Holdings)(Taco Bell, Pizza Hut, KFC, Long John Silver's)

Revenues 1258.3 n/a 244 2202Cost of Goods Sold 937.9 n/a 122.2 1021Gross Profit 320.4 n/a 121.8 1181Gross Profit Margin 25.50% n/a 49.90% 53.60%SG&A Expense 193.3 n/a 66.6 784Depreciation & Amortization 0 n/a 35.2 111Operating Income 127.1 n/a 20 286Operating Margin 10.10% n/a 8.20% 13.00%Net Income 36.8 n/a 11.5 164Net Profit Margin 2.90% n/a 0.51% 7.40%

Cash 34.8 n/a 17.6 110Net Receivables 54.2 n/a 23.2 175Inventories 22.1 n/a 12.7 56Total Current Assets 131.4 n/a 65.1 547Total Assets 382.3 n/a 387.4 4388Short Term Debt 43.2 n/a 0.2 696Total Current Liabilities 154.1 n/a 66.4 1805Long-Term Debt 611.5 n/a 105.1 1552Total Liabilities 807.2 n/a 191.8 4284

Total Equity -424.9 n/a 195.6 104

Source: Hoover’s Online

Page 18: Pizza Industry

Market View

December-01

52 week high n/a n/a $35.19 33.1752 week low n/a n/a $23.37 20.35Market Value n/a n/a $522.60 7,326.40Shares Outstanding n/a n/a 18.7 295.5Price/Sales Ratio n/a n/a 0.55 0.98Price/Earnings Ratio n/a n/a 12.55 13.33Return on Assets n/a n/a 12.80% 11.10%Return on Equity n/a n/a 34.70% 107.90%Current Ratio n/a n/a 0.27 0.43Long-Term Debt/Equity n/a n/a 0 4% Institutional Owned n/a n/a 69.60% 76.50%12 Month Revenue Growth n/a n/a -3.50% 8.10%36 Month Revenue Growth n/a n/a 6.10% -2.30%

Page 19: Pizza Industry

Pizza Customers

Page 20: Pizza Industry

Who Eats Pizza?

Source: Chain Leader, June 2000

Page 21: Pizza Industry

Fun Facts About thePizza Customer

494% of America’s population eats pizza.

4Each man, woman and child in America eats an average of 46 slices (23 pounds) of pizza a year

493% of all Americans eat at least one pizza a month

437% of kids say pizza is their favorite food

4Children between the ages of 3 and 11 prefer pizza over all other food groups for lunch and dinner

4Americans eat approximately 100 acres of pizza each day, or about 350 slices per second

Source: www.franchisehelp.com/web2000/pizza2002.htm www.pizzaware.com/facts.htm

Page 22: Pizza Industry

When Do Consumers Eat Pizza?

Source: Chain Leader, June 2000

Page 23: Pizza Industry

How Do Consumers Pay For Pizza?

Source: Chain Leader, June 2000

Page 24: Pizza Industry

Where Do Consumers Eat Pizza?

Source: Chain Leader, June 2000

Page 25: Pizza Industry

Industry Developments

Page 26: Pizza Industry

Industry Trends to Watch

4 A rise in convenience store locations

4 A shift in delivery/sit down restaurant pizza occasions to packaged pizza occasions (frozen)

4 New product introductions

4 Competitive deep discounting

Source: www.pmq.com/mag/2002summer/pizza_power.shtml

Page 27: Pizza Industry

Industry Sources

Page 28: Pizza Industry

Sources

4 www.pmq.com - store census, market share, industry trends4 www.aboutpizza.com - history, types of pizza4 www.pizzaprosperity.com - industry statistics4 Pizza Today, August 2002 - sales information4 SalesTrac Weekly - weekly sales growth4 Hoover’s Online - financial outlook4 www.dominos.com - sales growth4 www.yum.com - sales growth4 www.papajohns.com - sales growth4 www.franchisehelp.com - pizza facts4 www. pizzaware.com - pizza facts4 Chain Leader, June 2000 - customer profile