Panarottis Pizza Pasta: Big On Growth

Spur Corporation launched Panarottis Pizza Pasta 22 years ago, and the brand has since secured its place as the leader in the sit-down Italian restaurant franchise sector.

Panarottis Pizza Pasta: Big On Growth

When Tyrone Herdman-Grant was asked to head up the Panarottis brand as chief operating officer, the first thing he did was launch a roadshow to reconnect with franchisees across the country. “I had a placard with our slogan, ‘Big on Family. Big on Pizza’ that I started each event with,” he recalls.

“The Big on Family was crossed out to read Small on Family, which was my view of Panarottis’ primary challenge. I knew it was dramatic, but we had been saying one thing, and doing another. If we wanted to experience real brand growth, we needed to get back to our roots and focus on who we are, and who our target market is.”

Real growth is certainly on the cards. The brand currently has 71 stores and aims to hit the 100 mark within five years. Panarottis is also currently performing well and experiencing month-on-month double-digit growth.

“Panarottis was a well-respected brand when it was launched, and it’s remained so, but we realised there was a lot of scope for growth. We are already the largest sit-down pizza franchise in South Africa, but we have plans to become much bigger,” says Herdman-Grant.

“Whenever you launch a brand, whether you’re an established group or a new franchisor, the first thing you need to do is get your systems in place and cost control in focus,” he adds.

“Panarottis is an established brand, with all those issues well in hand. We realised that we needed a revamp if we wanted to focus on growth.”

Aiming high

So, what takes an already established brand to the next level? According to Herdman-Grant, step one was to critically evaluate the brand, determine where there was room for improvement, and then begin to implement changes.

“Panarottis is a popular brand. It’s well known, it’s well loved and there’s never been a question that consumers enjoy our top quality, affordable meals,” he says. “But after 22 years it was also not a growing brand. Spur Corporation launched Panarottis because it wanted to enter the pizza and pasta market at a time when there were no other franchises offering Italian food, and while the brand has progressed over the past two decades, it’s now time to take it to the next level, which means rejigging and refining the business model to focus on product, efficiencies and meeting our customers’ needs.”

Herdman-Grant, who had steadily come up through the Spur ranks from waiter, to manager, to franchise owner and finally regional operations manager at Spur’s Head Office, understood franchising from the ground up. As COO of Panarottis, he gathered his team together and set to work.

There had been progression with the group in terms of development, from adding slice bars to implementing great specials, but in order for the brand to enter a new phase of growth, a brand revitalisation strategy was necessary.

“We’ve kept the elements that were working, and taken a critical look at those that weren’t,” he says. “You can’t rest on your laurels. If something isn’t working as well as it should, admit it and find a better way to do things. It’s as simple as that.”

One of the strengths of Spur Corporation is its preference for Head Office area managers who come from franchising backgrounds. This means they understand franchisees and the challenges they face, and can offer excellent support to the owners in their areas. They can also give Head Office detailed feedback on what is and isn’t working with the brand as a whole.

“A franchise is only ever as strong as its franchisees, which is why we started our growth drive with a roadshow,” explains Herdman-Grant. “Panarottis was launched by Spur Corporation, from which it receives ongoing support and group expertise, allowing it to focus intently on growth. The intensive focus on growth that had gone into Spur has now been added to the Panarottis brand.

“With the roadshow we needed to achieve two things. First, we wanted to take a closer look at where we were and where we wanted to be positioned in the market, and second, we needed our franchisees to get as excited as we were about our plans.”

A new take on a proven concept

Looking back, Panarottis was known for two things. It offered good quality, generous meals at an affordable price, as well as a warm and cosy (if somewhat dated) atmosphere. “There were a few things that didn’t need to change,” confirms Herdman-Grant.

“One of the pillars of our business is dough, and this is something we have perfected over the years. The early years taught us a lot. Dough reacts differently to different climates and temperatures, so stores in KwaZulu Natal, for instance, had different challenges to those in the much drier Highveld regions. Our original menu was designed by a chef, and has been refined and improved over the years.”

On the other hand, while the core recipes haven’t changed much since the menu was first developed 22 years ago, the ingredients have. “We have managed to source ingredients from Italy that are not only of better quality, but actually more cost-effective as well,” says Herdman-Grant. “This has created better margins for our franchisees, and at the same time a far superior quality offering for our customers.”

A firm believer that customers vote with their feet, Herdman-Grant and his team are fanatical about quality. “We need to give our franchisees the best price possible through our collective buying power, but never at the expense of quality,” he says.

“The day we start putting price above quality is the day we should leave this office. Yes, you want to be cost-effective and efficient, but the way to turn a profit is to keep customers coming back, and the way to do that is with good food and service.”

Hand-in-hand with great meals is a good marketing strategy that appeals to the right consumers; this is where the team’s real magic has gone to work. “First, we needed to admit to ourselves that although we claimed to be a family restaurant, we were missing some of the key ingredients of a family restaurant.”

Focus on family

While there were popular family specials in place (like Kids Eat Free on Sundays), one key aspect that was conspicuously missing was the presence of child play areas. “You can’t claim to be a family restaurant if you don’t cater for the kids,” says Herdman-Grant. “Our customer research showed us that we were perceived as a family restaurant, but the lack of amenities frustrated our customers.

“The old way of thinking was that a play area meant more square metres, which meant higher rent. Instead, a play area brings in more families, which means a higher turnover, which justifies the additional rent – and of course brings us in line with the way we want to have the brand perceived as a family restaurant.”

The team also used the opportunity of change to revamp the Panarottis look. “The brand’s look and feel hadn’t really changed very much over the course of two decades,” he says. “It had been updated, but if we were completely honest with ourselves, it had become a little old and tired. The turnover we wanted wasn’t there. If we wanted our franchisees to become more profitable – and for the brand to grow as a whole – we needed to start with the brand, and then work our way down.”

Panarottis had created an updated and fresh store design for its Australian branches, and Herdman-Grant and his team used this as a blueprint for the local revamp. “Since then, we’ve made major changes to our décor, lighting and furniture. We’re now chic, modern and far more minimalistic.

“We also took a look at additions to the brand that weren’t working as well as we had hoped.” One of these was the slice bar, a concept that hadn’t quite taken off.

“We realised that for the slice bars to work, they needed to be a model of their own. Now the slices are cooked at the slice bar, customers can see their food being prepared, all ingredients are fresh and they can have a cooldrink (and at some stores an ice cream) while they wait – it’s a separate, mini take-away model.

“The delivery, take-away and slice markets have been approached in a different manner to our traditional sit-down model and have been refined to offer excellent product in a fast efficient manner. Store owners with a slice bar have increased total turnover by almost 10%, which is a significant value-add.”

In addition to this, each store’s coffee offering has been upgraded. “We made a deal with Ciro, the Lavazza distributors in South Africa, and secured R2 million worth of new coffee machines. We now have a gourmet coffee offering.” Panarottis has already seen a 50% increase in coffee sales as a result of its excellent quality offering.

The team also reviewed its marketing. The Cheese of the Day feature on the Fresh Drive on 5fm was already in place and popular (it’s now the Feel Good Flashback), as were the weekly specials on offer (Thursday’s All-You-Can-Eat bottomless pizza and Kids Eat Free).

“Subsequently we started Tuesday’s buy one, get one free, and entered the breakfast market with our innovative and highly popular breakfast pizza. Panarottis has also launched an eTV campaign, which delivers a weekday special message every Sunday night on eTV throughout the year. We’ve also improved the dessert offering, serving it and coffee with an in-store homemade ‘CaraNibble’ sweet on the house.”

Getting it right

Brand growth is all about looking at the customers and then delivering on their needs. For Spur Corporation this is two-fold. “We need to take into account what Panarottis customers want, but we also need to keep our franchisees happy. They’re also our customers,” says Herdman-Grant.

The brand revamp has helped meet the needs of important customer segments and is helping to ensure that brand standards are improved and grown.

“You’re only ever as good as the last meal you served. Each store needs to be better tomorrow than today. We can provide our franchisees with the framework: The system, menu, ingredients, buying power, and look and feel, and after that they need to give their customers great service and a quality offering with our ongoing support.”

Head Office supports this through its area managers, who visit each store within their area on a regular basis. “All stores receive monthly operational reports. Every product is weighed, measured, tasted and tested for freshness.

How clean is the store? Are systems followed? Is the store turning a decent profit? What do the store’s financials look like? Do the on-floor staff need training? Each of these areas is addressed and a comprehensive report is generated, stating what needs to be addressed by the following month. If a franchisee does not respond sufficiently, there will be a follow-up visit within a week.”

Problem stores will receive weekly or even daily visits, and all stores will regularly be subject to unannounced visits. “The brand is only as strong as its franchisees, and so this is about supporting our franchisees and helping them become as profitable as possible by running the best business they can. It’s also about ensuring that no franchisee is detrimental to the brand as a whole,” says Herdman-Grant.

In line with this is the recommendation that an owner/operator is always based in-store. “In the case of multiple store owners, we insist that the manager has an equity stake,” he says, adding that many franchisees have chosen to empower waiters to junior managers from within the business. Promising senior managers are sometimes promoted to operating partners and given an equity stake which they can pay off from their profit share.

“Many of these smaller stake-holders go on to buy their own stores as well. It’s a great way to empower individuals within the group who lack the financial resources to start their own businesses.”

An express model

The Panarottis Pizza Express model is a smaller take-away model that is less capital intensive and therefore a more affordable way for potential franchisees to enter the corporation as franchise owners.

It’s also part of the corporation’s strategy to reach a wider market than before, particularly in smaller towns and in high rent locations, where the rental of bigger stores has previously made opening a Panarottis in that location unsustainable (such as airports).

Fancy yourself a franchisee?

Panarottis Pizza and Pasta

  • Ideal store size: 320m2 to 350m2
  • Minimum investment required: R2,2m – R2,8m
  • License Fee: R80 000
  • Monthly Franchise Fee: 5%
  • Monthly advertising fee: 4%
  • Hot spots for development: Various sites available on request
  • The ideal franchisee Passionate entrepreneurs who enjoy people and food.

Panarottis Pizza and Pasta Express

  • Ideal store size: 60m2 to 100m2
  • Minimum investment required: R800 000 – R1,2m
  • License Fee: R60 000
  • Monthly Franchise Fee: 3%
  • Monthly advertising fee: 3%
  • Hot spots for development: Various sites available on request
  • The ideal franchisee Passionate entrepreneurs who enjoy people and food.
Nadine Todd
About the Author
Nadine Todd is the Managing Editor of Entrepreneur Magazine, the How-To guide for growing businesses. Find her on Google+.

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