Since the pandemic began, Domino’s, Pizza Hut, Papa John’s and Little Caesars did very well.
A lot has been written about how the chicken sandwich wars are what has saved QSR restaurants during the pandemic. Sure, the numbers of fried chicken sandwiches that have been sold are gi-normous and yes, just about every chain has jumped on the bandwagon and added the sandwich to their menus. And, as we reported last week, Popeye’s, based on the success of its best selling chicken sandwich, is adding a fried fish sandwich to its menu. But the real winner during the pandemic is actually pizza.
Since the pandemic began, Domino’s, Pizza Hut, Papa John’s and Little Caesars, four chains that control 43 percent of the $44 billion US pizza market according to Technomic, did very well. Domino’s and Papa Johns grew about 12 percent and frozen pizza in supermarkets grew by 21 percent according to Nielsen. As we read headlines that supermarkets and delivery services were hiring, and almost 70,000 restaurants were closed permanently; what we did not hear much about was that Domino’s hired an additional 30,000 workers. Or that in the past 9 months or so, more than 2,000 new pizzerias opened. Truth be told, I love pizza. Of course I do, I grew up in an Italian neighborhood in New Jersey and my favorite pizza comes from the Star Tavern in Orange, NJ. Business wise, pizza is good business – but there is a secret weapon that is its key to success during the pandemic that I’ll share in just a minute.
Pizza is profitable. Consider the ingredients -- flour, yeast, water, sauce, cheese and toppings. None of these are expensive. On a medium pizza the cheese is the most expensive ingredient at $2.00 for a high quality mozzarella, the dough adds about $0.25 and the sauce $0.35. That adds up to $2.60 for a basic pizza that could be sold for at least twice that amount and typically sells for much more. And if you sell it by the slice? Wow. True this doesn’t include labor, rent, utilities and other expenses, but you can see how selling pizza can be a good business. The average independent pizzeria shows a profit of around 20% - supermarkets show about 1.5%. Compare it to a fried chicken sandwich that only serves one person (versus the pizza which could serve 2 to 3 people) where the product cost is around 50-75 cents for the chicken (depending on if its breast or thigh meat), 50-75 cents for the bun depending on the type, condiments, lettuce and tomatoes for another 50 cents and the sandwich cost is about 2 bucks.
Popeye’s chicken sandwich costs about $3.99 depending on where you live in the country. The secret weapon in the food wars was that pizza has always had take-out and delivery in its DNA. Other restaurants typically relied on its in-store sit down business and had to pivot quickly to pick up or rely on third party delivery services, which take a huge percentage from the bottom line. Pizza is poised to continue its growth for a number of reasons – its endless varieties of toppings, types of crusts and thicknesses, it’s nutritional profile – yes pizza is healthy depending on what you put on top, it’s ability to please and serve the whole family reasonably and its affordability.