Latest / Choppin’ It Up by Bloomberg Intelligence / Blaze Pizza’s Smaller Stores to Fuel Development

Transcript

Blaze Pizza’s Smaller Stores to Fuel Development · Choppin’ It Up by Bloomberg Intelligence

0:20
Speaker 1: Welcome to Chopping It Up. I'm your host, Mike Hallen.
0:23
Speaker 1: I'm the senior Restaurant and food Service analyst at Bloomberg Intelligence.
0:27
Speaker 1: Today we're joined by Bette Guahardo, CEO of Blaze Pizza.
0:30
Speaker 1: Thanks for doing this, Beto.
0:32
Speaker 2: Hey, Mike, thanks for having me. I really appreciate it.
0:34
Speaker 1: So can you start out by telling us a bit
0:37
Speaker 1: about your career background and then what attracted you to
0:40
Speaker 1: Blaze Pizza.
0:41
Speaker 2: Yeah, thanks for the question. You know, coming out of
0:45
Speaker 2: graduate school at Northwestern, I ended up spending about ten
0:49
Speaker 2: years in professional services with Deloitte and McKenzie, and that
0:53
Speaker 2: actually then kind of led me into this track of
0:57
Speaker 2: being a corporate strategist. I led corporate strategy for some
1:01
Speaker 2: of the world's most iconic brands, Levi Strauss, Avon Cosmetics,
1:07
Speaker 2: and Starbucks Coffee Company. While I was at Starbucks, one
1:12
Speaker 2: of my mentors, actually the CFO, said to me one day,
1:16
Speaker 2: you really need to go run a company, and that
1:18
Speaker 2: actually led me to an opportunity with Focused Brands to
1:21
Speaker 2: be the president of Schlatsky's and eventually the president of
1:24
Speaker 2: the International division. And while I was with the International Division,
1:28
Speaker 2: you know, I thought that well, maybe I won't be
1:31
Speaker 2: a CEO. Maybe I'm meant to be a president of
1:34
Speaker 2: a division. And of course, as soon as you think that,
1:36
Speaker 2: the phone rings. And I've always loved Blaze Pizza. I
1:42
Speaker 2: love the experience that you get inside a Blaze Pizza's store.
1:45
Speaker 2: I love the fact that you can make it your own.
1:48
Speaker 2: It was always one of my favorite pizzas. And so
1:51
Speaker 2: when I met the team, you know, it was a
1:54
Speaker 2: relationship made in the stomach. Very cool.
2:00
Speaker 1: Can you give the audience a little bit of history
2:02
Speaker 1: about Blaze, you know, talk a little bit about the
2:05
Speaker 1: service model and the menu.
2:08
Speaker 2: Yeah. So, Blaze was actually founded in twenty eleven by
2:12
Speaker 2: Rick and Lice Wetzel here in Pasadena, and their idea
2:17
Speaker 2: was basically, for lack of a better word, create the
2:20
Speaker 2: subway of pizzas, right, and that for one price, you
2:26
Speaker 2: can make your own pizza and have as many toppings
2:29
Speaker 2: as you would like. As you know traditional pizza experiences,
2:34
Speaker 2: you pick the size of your pizza and then every
2:37
Speaker 2: topic that you want is going to cost you another
2:38
Speaker 2: two to five dollars. Right, Well, Blaze introduced this idea
2:44
Speaker 2: that for a build your own pizza, you could pick
2:47
Speaker 2: the proteins you wanted, You could pick the vegetables that
2:51
Speaker 2: you wanted. You get to pick a crust, you get
2:53
Speaker 2: to pick a sauce, you get to pick your cheeses,
2:55
Speaker 2: and you're truly making your own pizza as a matter
2:59
Speaker 2: of fact, when it works really well. And I hope
3:03
Speaker 2: to make this happen someday. I want Mike to be
3:06
Speaker 2: able to come into a Blaze Pizza and say, hey,
3:08
Speaker 2: I want the Mike Special, and that's a pizza that
3:11
Speaker 2: you created. We like to say anybody who has an
3:18
Speaker 2: enjoyment for great flavor can be a pizza artist and
3:22
Speaker 2: at Blaze that specialty experience of making it your own
3:28
Speaker 2: and doing so Mike doing so in an experience that's
3:32
Speaker 2: under one hundred and eighty seconds. So when it's done right,
3:37
Speaker 2: it almost feels magical that you've just created a pizza,
3:40
Speaker 2: it's been fired up in that oven and it's being
3:43
Speaker 2: handed to you by the time you got your own drink.
3:47
Speaker 2: And that's Blaze.
3:49
Speaker 1: Yeah, that's that's very cool. How many restaurants does Blaze
3:54
Speaker 1: own operator franchise right now? And where you strong geographically?
3:58
Speaker 2: Yeah, we have about three hundred and thirty stores. Mike
4:02
Speaker 2: and our biggest markets are actually in Florida and California,
4:08
Speaker 2: but you know, don't tell that to Texas, if you
4:11
Speaker 2: know what I mean. And then we've got stores essentially,
4:16
Speaker 2: I believe in thirty five different states, and we also
4:20
Speaker 2: have several international markets as well.
4:23
Speaker 1: So what's the what's the mix of company owned versus
4:25
Speaker 1: franchise and where do you think the sweet spot is
4:28
Speaker 1: for Blaze?
4:29
Speaker 2: Yeah, great question, you know, it's it's an interesting financial
4:36
Speaker 2: analysis to do based on store profitability and cost to
4:42
Speaker 2: build a new restaurant and what your investors are seeking
4:46
Speaker 2: with regards to annual growth. You see in a lot
4:50
Speaker 2: of concepts. You know, McDonald's is a great one, right
4:53
Speaker 2: where they basically held on to about thirty percent of
4:57
Speaker 2: their company owned stores and eventually went down to twenty
4:59
Speaker 2: and eventually down to ten and now it's like almost
5:01
Speaker 2: all franchise. Right then you look at someone like Chipolte
5:05
Speaker 2: and it's all company owned stores because the stores are
5:07
Speaker 2: so profitable. What I learned in this industry mic is
5:12
Speaker 2: that if you can deliver four wall profitability of above
5:17
Speaker 2: sixteen to eighteen percent based on your cost of capital,
5:22
Speaker 2: you're probably better off actually owning that store. Versus being
5:25
Speaker 2: in a franchise model. But if the four wall profitability
5:29
Speaker 2: is going to be less than that, then you let
5:30
Speaker 2: someone else invest their capital who doesn't need as high
5:34
Speaker 2: of a return. Currently, we've got about ten company owned stores,
5:40
Speaker 2: and I believe the sweet spot's going to be somewhere
5:42
Speaker 2: in the neighborhood you know of around fifteen to twenty percent.
5:46
Speaker 1: Okay, okay, So how are you going to hit the
5:48
Speaker 1: fifteen to twenty percent. Are you looking to buy out
5:50
Speaker 1: some franchisees, are you gonna build your build them yourself?
5:52
Speaker 1: What's the plan right now?
5:54
Speaker 2: Yeah, it's a combination of things. I can't get into
5:57
Speaker 2: the specific details, but suffice to say we have been
6:01
Speaker 2: approached by a number of developers with opportunities to actually
6:04
Speaker 2: build our own stores that would be company owned, and
6:07
Speaker 2: that includes some non traditional locations as well, by the way,
6:11
Speaker 2: which is a lot of fun. And though we do
6:13
Speaker 2: show up in several airports, it's definitely a place that
6:17
Speaker 2: we want to be more as well as you know,
6:19
Speaker 2: what I like to think of as locations where we
6:22
Speaker 2: might not necessarily have access to the real estate. Right
6:25
Speaker 2: So if we can, you know, partner with the developers
6:29
Speaker 2: and get access into that real estate, then we can
6:31
Speaker 2: operate them ourselves. It's one example. Two, the system is about,
6:37
Speaker 2: you know, twelve years old, right, and industry best practices
6:43
Speaker 2: is that you are improving your location every three to
6:48
Speaker 2: five years with a modest remodel and then probably a
6:54
Speaker 2: massive remodel, you know, in the seven to ten year
6:57
Speaker 2: time period. Some of our franchisees find themselves now at
7:01
Speaker 2: that threshold of do I want to invest additional capital
7:04
Speaker 2: and remodel the store. It's interesting because those franchisees that
7:10
Speaker 2: really see themselves as operators with an investment want to
7:15
Speaker 2: be operators with an investment, and those franchisees who are
7:19
Speaker 2: investors who have other operators oftentimes are like, well, now
7:24
Speaker 2: I want to try something else, And so they're approaching
7:28
Speaker 2: us with an opportunity to say, hey, would you guys
7:29
Speaker 2: like to take over? And it's happening in two different ways.
7:33
Speaker 2: So we are actually in the process of acquiring some
7:37
Speaker 2: of our franchise stores, but we are also in the
7:40
Speaker 2: process of helping some of our franchisees sell to new investors.
7:45
Speaker 1: Cool and so can you talk a little bit about
7:47
Speaker 1: where where the locations are, you know, and a little
7:52
Speaker 1: bit about the box and if there's been any you know,
7:55
Speaker 1: discussions about maybe changing the box or the way you
7:58
Speaker 1: get customers their food based on you know, the proliferation
8:03
Speaker 1: of off premise and the popularity of drive throughs over
8:06
Speaker 1: the last couple of years. But you know, i'd imagine
8:08
Speaker 1: that you assemble and bake these pizzas, you know, fast
8:13
Speaker 1: enough that it gives you some options.
8:16
Speaker 2: Great question. Since the pandemic, the guest experience in a
8:23
Speaker 2: restaurant has dramatically changed, especially in QSR and fast casual,
8:29
Speaker 2: more and more orders and this is nothing new. Everyone
8:33
Speaker 2: knows this right coming in online, I want to place
8:36
Speaker 2: my order ahead of time, I want to come into
8:38
Speaker 2: the store and pick it up, or I want to
8:39
Speaker 2: deliver it to me. At one point in time, let's
8:42
Speaker 2: go back to twenty eighteen, we were closer to ninety
8:47
Speaker 2: percent of all of our orders were placed in the
8:50
Speaker 2: store for an in store dining experience. Fast forward through
8:56
Speaker 2: the pandemic. Now we're down to about sixty five or
8:59
Speaker 2: seventy percent, right with thirty to thirty five percent of
9:03
Speaker 2: our orders being placed through the app or web to
9:08
Speaker 2: be picked up or to be delivered. And so the
9:13
Speaker 2: size of our box doesn't need to be as big
9:16
Speaker 2: if it's not going to be utilized as much, not
9:19
Speaker 2: to mention with the cost of development, particularly interest rates,
9:25
Speaker 2: seeking smaller locations and a new store format where we
9:30
Speaker 2: can actually lean in faster, more cost effectively into the
9:36
Speaker 2: off premise experience. We just recently opened up a store
9:40
Speaker 2: in Florida that's down to seventeen hundred square feet and
9:44
Speaker 2: it is doing great, actually beating our expectations for its
9:49
Speaker 2: first three weeks of sales, and so we're going to
9:52
Speaker 2: be trying that more and more and more. I love
9:55
Speaker 2: your question on drive through, by the way, and I
9:57
Speaker 2: actually do believe that with the speed of our equipment
10:01
Speaker 2: and our service levels and our capabilities, that there is
10:05
Speaker 2: an opportunity for us to lean in to being your
10:08
Speaker 2: drive through piece experience.
10:12
Speaker 1: Yeah, that'd be cool. Seventeen hundred square feet. How does
10:15
Speaker 1: that compare to how big this the units were historically
10:20
Speaker 1: and how much cheaper is it to build these smaller units.
10:24
Speaker 2: It's about half the size, and half the size equates
10:28
Speaker 2: to anywhere from twenty five to thirty five percent less
10:30
Speaker 2: expense to build it.
10:33
Speaker 1: That's great. And are you like in typically located in
10:38
Speaker 1: shopping malls or you and things that the strip malls
10:41
Speaker 1: and things of that nature.
10:44
Speaker 2: So the vast majority of the Blaze locations are either
10:49
Speaker 2: in standalone buildings themselves or in line in strip malls,
10:55
Speaker 2: but we also have locations within traditional malls as well.
11:00
Speaker 2: You know, I do believe that we can win in
11:07
Speaker 2: any one of these type of real estate plays. Uh.
11:14
Speaker 2: The most important thing is that we are focusing our investments,
11:19
Speaker 2: you know, on a maybe be real estate, and we
11:23
Speaker 2: don't get greedy with c and oftentimes, you know, the
11:29
Speaker 2: development partners that we are in business with, they have
11:33
Speaker 2: ideas of where the traffic patterns are going to be
11:35
Speaker 2: in a year or two years from now. And so
11:39
Speaker 2: based on the you know, software that we have and
11:42
Speaker 2: the tools that we use and the insights that we
11:44
Speaker 2: have with some of our development partners, I think you're
11:47
Speaker 2: going to see us continue both in line and standalone
11:50
Speaker 2: locations going forward.
11:53
Speaker 1: Okay, cool, By.
11:55
Speaker 2: The way, if it's if it's in line, I want
11:57
Speaker 2: to be on the end so I can open that
11:58
Speaker 2: drive through window.
12:00
Speaker 1: Yeah, I like it. Is there any any other unit
12:04
Speaker 1: economic data that you'd like to share?
12:07
Speaker 2: You know, I think the important thing for someone who
12:10
Speaker 2: would want to consider having a Blaze Pizza if we
12:14
Speaker 2: can get the development cost you know, to seven hundred
12:16
Speaker 2: and fifty thousand dollars or less, and we can run
12:21
Speaker 2: you know, an average unit volume up to a million
12:24
Speaker 2: and a half on that investment, even in the first year,
12:30
Speaker 2: where you're still learning to be really efficient. Right, if
12:35
Speaker 2: you're capturing you know, fifteen percent, let's say, in profitability,
12:39
Speaker 2: you're doing a really really good job, right, and now
12:43
Speaker 2: you're looking at what twenty four month eighteen month payback
12:46
Speaker 2: you know on your investment. But even on a lower
12:50
Speaker 2: AUV call it a million two and you know, a
12:54
Speaker 2: twelve percent four wall profitability, you're still looking at, you know,
13:00
Speaker 2: twenty four to thirty six months if you're running and
13:03
Speaker 2: operating correctly. That being said, my team and what we're
13:10
Speaker 2: seeking is to continue to develop operating models and find
13:15
Speaker 2: locations where we can actually drive above that sixteen percent.
13:21
Speaker 2: Now I told you what my percentage of company and
13:23
Speaker 2: stores I want to have. But the more we can
13:26
Speaker 2: find opportunities to drive fifteen to twenty percent four wall
13:29
Speaker 2: profitability with that level of investment, that's just going to
13:32
Speaker 2: drive continued individual seeking to invest with Blaze. And by
13:40
Speaker 2: the way, I should share with you. Part of our
13:44
Speaker 2: plan is international expansion. And as I mentioned, I ran
13:51
Speaker 2: eight brands internationally before I came to Blaze Pizza. And
13:56
Speaker 2: so we are in the process, Mike, of talk to
14:00
Speaker 2: potential investors in the Middle East, in North and South Asia,
14:06
Speaker 2: and even in Western Europe. And I'm hoping that we'll
14:09
Speaker 2: have some good news next year around some opportunities that
14:12
Speaker 2: we're seeking as we discuss investments with these individuals.
14:19
Speaker 1: Very cool. So you're looking at that kind of like
14:21
Speaker 1: a master franchise model overseas.
14:23
Speaker 2: That's exactly right, That's exactly right. Sell the entire territory,
14:28
Speaker 2: give them an opportunity, you know, with their knowledge and
14:31
Speaker 2: their capability to find the real estate. And you know,
14:35
Speaker 2: as I know, you know when you're talking Middle East,
14:37
Speaker 2: when you're talking you know in Asia, it's in the mall.
14:45
Speaker 2: I mean, it's in the mall. And oftentimes your investors
14:49
Speaker 2: are actually the mall owners themselves who are going to
14:54
Speaker 2: build with you. So yeah, a lot of excitement on
14:57
Speaker 2: the Blaze Pizza team right now for what is happening internationally.
15:02
Speaker 2: Very cool.
15:02
Speaker 1: And how are how are you identifying the countries that
15:06
Speaker 1: you're kind of targeting and the partners that you're targeting.
15:09
Speaker 2: Yeah, great question. We actually conducted a rather sophisticated analysis
15:15
Speaker 2: on market opportunity uh and penetration capability. So it really
15:21
Speaker 2: starts with, you know, looking at what is the population's
15:27
Speaker 2: acceptance of Western brands, and then it is you know,
15:31
Speaker 2: what is their disposable income right for a consumer level.
15:35
Speaker 2: And then it's looking at the pizza market you know itself,
15:39
Speaker 2: and then it's assessing also risk associated with operating in
15:44
Speaker 2: that market, you know, political, economic, financial, et cetera. And
15:52
Speaker 2: then based on all that, we identify the markets that
15:56
Speaker 2: would have put it simply ease of getting into with
16:03
Speaker 2: the most opportunity, right, ease of getting into with the
16:06
Speaker 2: most opportunity, And that actually came to roughly fifteen international
16:11
Speaker 2: markets for us that we're seeking as our first Now
16:15
Speaker 2: that being said, if an opportunity presents itself with the
16:21
Speaker 2: really powerful developer, we're not going to walk away. We're
16:25
Speaker 2: not going to walk away. It's just that we're going
16:27
Speaker 2: to focus our sales efforts into those top fifteen markets.
16:32
Speaker 1: Yeah, I can tell you've worked in international before.
16:35
Speaker 2: Yeah.
16:37
Speaker 1: Now, it's a great answer, and you'd be surprised how many,
16:39
Speaker 1: you know, public companies. I asked that question and I
16:41
Speaker 1: don't get nearly as detailed an answer.
16:44
Speaker 2: No, thank you, So that that's very very cool to hear.
16:48
Speaker 1: So how fast are you looking overall to build the
16:51
Speaker 1: store base from here and out? You know, excluding international?
16:56
Speaker 1: You know, where are you looking to build new stores
16:58
Speaker 1: in the United States? Are you going to continue to
17:00
Speaker 1: build out Florida and California? Are there other markets that
17:02
Speaker 1: you're you're really targeting right now?
17:05
Speaker 2: So, you know, one of the challenges that a lot
17:07
Speaker 2: of brands have when they're in their early days of
17:10
Speaker 2: growth is that they do accept smaller developers and consequently
17:20
Speaker 2: you end up with a store to stores and it's
17:24
Speaker 2: not enough to actually gain the leverage, and so you
17:27
Speaker 2: have no economies of scale with your marketing dollars spend,
17:30
Speaker 2: and you're spending a lot more for distribution. You know
17:33
Speaker 2: how it goes. And so you know, the philosophy that
17:37
Speaker 2: we've adopted as a team is when where you're winning,
17:42
Speaker 2: When where you're winning, right and we're winning in Florida,
17:45
Speaker 2: and we're winning in California, and we're winning in Texas,
17:49
Speaker 2: and we also have significant opportunities in the northeast and
17:53
Speaker 2: the Midwest, but it's not going to be you know,
17:57
Speaker 2: winning in you know, small towns and trying to be
18:00
Speaker 2: the only player in town. Blaze Pizza is a concept
18:04
Speaker 2: and a model that actually works best in higher density
18:09
Speaker 2: urban areas when people are looking for something different for
18:15
Speaker 2: either lunch or dinner that's convenient to get to, that's
18:18
Speaker 2: going to be fast in service and a good experience. Right.
18:23
Speaker 2: That's not to say that you can't come to Blaze Pizza,
18:26
Speaker 2: you know, with your family and sit down and have
18:28
Speaker 2: a nice casual you know, dinner, even have a couple
18:31
Speaker 2: of drinks. But the truth of the matter is we
18:33
Speaker 2: know who our customer is, right, and we do almost
18:36
Speaker 2: as much lunch business as we do dinner business. And
18:39
Speaker 2: so it's people looking for a great, healthy pizza. I mean,
18:45
Speaker 2: we have you know, fresh ingredients in everything that we do,
18:49
Speaker 2: and people appreciate the fact that they have gluten free crust.
18:52
Speaker 2: You have a coliflower crust, we have a vegan crust,
18:56
Speaker 2: we have vegan cheese, I mean, and so on and
18:59
Speaker 2: so forth. So, yes, we're gonna win where we're winning.
19:03
Speaker 2: As mentioned, we will evaluate and maybe even decline areas
19:10
Speaker 2: that we know are going to be too challenging for
19:13
Speaker 2: the investors to make more money. Mike, I know what
19:16
Speaker 2: my job is. It's super simple. It's to help my
19:19
Speaker 2: franchisees make more money, right, And if I do that,
19:24
Speaker 2: they're gonna want to grow with us. And if we
19:27
Speaker 2: do that together, more people are gonna hear about it
19:30
Speaker 2: and want to be a part of the Blaze Pizza family.
19:34
Speaker 1: My mentor always taught men money flows to where it's
19:37
Speaker 1: treated best.
19:38
Speaker 2: So absolutely it's a good phrase.
19:41
Speaker 1: Yeah, yeah, great. Are you or your franchisees have any
19:45
Speaker 1: any issues finding quality real estate right now?
19:49
Speaker 2: Who is not having issues finding quality really now? Right?
19:54
Speaker 2: One of the big challenges, as everyone knows, because of
19:58
Speaker 2: current interest rates and bank's willingness you know, to lend
20:03
Speaker 2: money under their current conditions, is creating an atmosphere that
20:08
Speaker 2: we haven't seen, you know, in ten years, right, And
20:13
Speaker 2: so you know, for the individuals, for lack of a
20:19
Speaker 2: better word, the rich get richer in environments like this,
20:22
Speaker 2: you know, as they've got the dollars back to create
20:25
Speaker 2: these investments. We're actually looking right now at exploring some
20:31
Speaker 2: non traditional financial support for potential investors who want to
20:36
Speaker 2: be a part of Blaze. It's still early days, Mike,
20:38
Speaker 2: and I can't share it with you all the details,
20:40
Speaker 2: but you can begin to imagine how an individual who
20:44
Speaker 2: might have been very successful in becoming a Blaze franchisee
20:49
Speaker 2: when we had real estate interest rates less than three percent,
20:52
Speaker 2: now finds himself at seven percent going. I don't know
20:54
Speaker 2: if I can afford this now, there might be a
20:57
Speaker 2: way for us as a corporation to help.
20:58
Speaker 1: Them, right, good stuff. Yeah, And you have companies, competitors,
21:05
Speaker 1: other fast casual chains that have gotten equity money, you know,
21:09
Speaker 1: so they're getting the pressure from Wall Street to expand,
21:12
Speaker 1: and they're paying rents that I'm sure you know most
21:16
Speaker 1: franchises wouldn't want to match.
21:18
Speaker 2: That's right, That's right.
21:22
Speaker 1: Have you seen financing tighten up at all?
21:24
Speaker 2: We have as a matter of fact, you know, when
21:27
Speaker 2: I look at the pipeline that I walked into, you know,
21:30
Speaker 2: back in January of this year. We have a model
21:35
Speaker 2: that we use that based on where we are in
21:39
Speaker 2: the stage of negotiations and contracting, we have a percentage
21:45
Speaker 2: of viability that we believe will close in the deal. Right,
21:50
Speaker 2: And I've used this for like ten years and it
21:54
Speaker 2: really helps you, you know, plan for what you believe
21:57
Speaker 2: your development schedule is going to look like over the
22:02
Speaker 2: past year, Needless to say, some of those percentages that
22:06
Speaker 2: we had in the middle negotiation aspect where we're identifying
22:10
Speaker 2: real estate and investment have declined significantly as we can't
22:16
Speaker 2: count on them making it through the end of the pipeline,
22:20
Speaker 2: so you know it's not going to last forever. I
22:24
Speaker 2: believe the Fed is announcing that they are not raising
22:28
Speaker 2: interest rates, though they maintain the opportunity to do so
22:31
Speaker 2: in the future. We're seeing inflation coming down. The UK
22:34
Speaker 2: just reported that its inflation is down for three consecutive months.
22:40
Speaker 2: People are talking about a soft landing as opposed to
22:42
Speaker 2: going into recession, and I'm not the economist, but I
22:47
Speaker 2: remain optimistic.
22:49
Speaker 1: Good. How's your staffing in turnover levels right now compared
22:55
Speaker 1: to pre pandemic?
22:59
Speaker 2: I guess the way I would describe it again back
23:03
Speaker 2: to what we've seen. Let's first talk about pre pandemic
23:09
Speaker 2: and pandemic right because that's when everything fell apart and
23:15
Speaker 2: our turnover rate probably was up, you know, forty fifty
23:19
Speaker 2: pandemic versus pre pandemic. Okay, now let's take a look
23:24
Speaker 2: at where we are post pandemic and things have improved significantly,
23:31
Speaker 2: but there remains an open market. I like to say, Mike,
23:37
Speaker 2: your guest will never have a better experience than the
23:41
Speaker 2: employees are having in the store right for sure. And
23:46
Speaker 2: I believe that we have a lot of opportunity to
23:50
Speaker 2: continue to improve our employee experience so that it's joyful
23:55
Speaker 2: for them to want to be a part of the
23:57
Speaker 2: Blaze team. We're not where I want us to be yet,
24:03
Speaker 2: but we are working on programs to improve benefits for
24:09
Speaker 2: our franchise and their employees, our own store owned employees
24:14
Speaker 2: and helping them, you know, seek the types of workers.
24:19
Speaker 2: I know this sounds crazy, Mike. I've used all kinds
24:22
Speaker 2: of tools to identify great hospitality resources, but one of
24:28
Speaker 2: my mentors once told me, better hire for a smile.
24:34
Speaker 2: Nothing beats it hire for a smile. And so I've
24:38
Speaker 2: been sharing and teaching my franchisees about this philosophy of
24:43
Speaker 2: seeking the hire for a smile. And then, also, Mike,
24:47
Speaker 2: and this is this is this is where not only
24:50
Speaker 2: Blazed Pizza, but the entire industry I believe is missing
24:53
Speaker 2: an opportunity, and that is when you hire employees, don't
24:59
Speaker 2: think of it it as a job and a paycheck,
25:03
Speaker 2: but spend the time with the people that you hire,
25:06
Speaker 2: asking them what is it that you really want out
25:09
Speaker 2: of this job? And if they say a paycheck, say no,
25:12
Speaker 2: But why do you want that paycheck to pay the rent,
25:15
Speaker 2: to have some extra spending money to buy a car,
25:17
Speaker 2: to save it for college. And then we have the
25:20
Speaker 2: opportunity to help those employees learn how to build their
25:27
Speaker 2: savings solutions to make their dreams come true, not just
25:31
Speaker 2: collect a paycheck.
25:33
Speaker 1: Yeah, it's important and and you know it's seen and
25:37
Speaker 1: it bears itself out in the results. Right companies treat
25:40
Speaker 1: their employees well, treat their franchise as well, tend to outperform,
25:45
Speaker 1: So you know, that's really good stuff. And Danny Meyers
25:49
Speaker 1: talked about a bit about you know what you're talking about, right,
25:52
Speaker 1: Like the emotional intelligence is what you hire for. The
25:55
Speaker 1: skills can be taught basically to anyone, right.
25:58
Speaker 2: You know, I mean, Danny's my hero, to be honest
26:04
Speaker 2: with you. And of course, you know, I worked with
26:06
Speaker 2: Howard Schultz for six years and and and he had
26:11
Speaker 2: a lot, you know, to teach and to learn about that.
26:13
Speaker 2: And I like to think that you know, between those
26:17
Speaker 2: two guys. The books have been written. We just have
26:21
Speaker 2: to learn how to adapt them. It's great.
26:25
Speaker 1: What's your biggest opportunity for top line growth? Is it,
26:28
Speaker 1: you know, building more stores? I mean, or do you
26:31
Speaker 1: feel like there's significant room to grow same store sales?
26:34
Speaker 1: What are you looking at right now?
26:36
Speaker 2: So? I think there's a couple of things. Look without
26:41
Speaker 2: a doubt. I mean, we're in the franchise business first
26:43
Speaker 2: and foremost, and and and I told you about my
26:48
Speaker 2: company owned store plan. I mean, yes, adding more units
26:51
Speaker 2: is definitely gonna, you know, be an accelerator, especially at
26:55
Speaker 2: our size with three hundred and thirty stores, right if
26:59
Speaker 2: we can get back to forty fifty sixty new units
27:02
Speaker 2: per year, I mean, that's tremendous opportunity for us. But
27:08
Speaker 2: let's talk about in store top line growth. You know
27:12
Speaker 2: a lot of folks, you know, are looking at the
27:14
Speaker 2: fourth quarter here and believing that based on the current situation.
27:21
Speaker 2: And by the way, do not dismiss what's going to
27:25
Speaker 2: happen with the student loan repayment programs that are coming up.
27:31
Speaker 2: It is going to significantly diminish the amount of available
27:35
Speaker 2: spending dollars for that generation. And they may choose to
27:42
Speaker 2: eat out less. Right, there's a striking balance between between
27:52
Speaker 2: the equations of opportunity and value, and Blaze has not
27:59
Speaker 2: traditionally been a brand that has done a lot of
28:01
Speaker 2: discounting because of the value of what we're offering, but
28:06
Speaker 2: the opportunity to increase the number of visits for our
28:12
Speaker 2: customers and our fans if we can show them opportunities
28:17
Speaker 2: to come to Blaze when they haven't traditionally. So that
28:20
Speaker 2: probably means Mike looking at things like, you know, something
28:25
Speaker 2: that we're offering special on Tuesday. We recently ran a
28:28
Speaker 2: kids eat free on Tuesday, and suddenly Tuesday Night became
28:32
Speaker 2: a family event right in all of our stores. We
28:37
Speaker 2: only ran that in August, but we're learning and we're
28:40
Speaker 2: going to continue to seek opportunities to create new value
28:45
Speaker 2: for customers to come to us in non traditional moments.
28:50
Speaker 2: In addition to that, we've got some menu expansion opportunities, right,
28:56
Speaker 2: new reasons to add attachment onto the pizza that you're buying,
29:02
Speaker 2: and new reasons to come to Blaze Pizza because we
29:06
Speaker 2: have non carb oriented product offerings. I can't tell you anymore,
29:13
Speaker 2: but it's going to be exciting.
29:16
Speaker 1: Sounds great. Yeah, we just wrote a pretty big piece
29:20
Speaker 1: about industry sales and the economic indicators that we follow,
29:26
Speaker 1: and you know, we were talking about student loans and
29:28
Speaker 1: it's you know, I think there's thirty million people paying
29:31
Speaker 1: on average four hundred dollars a month. I mean, you
29:34
Speaker 1: do that math. That's a lot of money getting sucked
29:36
Speaker 1: out of discretionary spending. So yeah, that's something we're watching
29:39
Speaker 1: pretty closely. And you know, I think what you're doing
29:43
Speaker 1: makes a lot of sense. Leveraging the box and the
29:45
Speaker 1: labor that you already have in the store at slower
29:49
Speaker 1: days or times of the day has been successful for
29:53
Speaker 1: so many of the restaurant chains that we've covered over
29:56
Speaker 1: the years.
29:57
Speaker 2: Yeah, those are all good points. And feel free to
29:59
Speaker 2: send me any analysis that you have, by the way,
30:03
Speaker 2: on what we just talked about with the loan situation.
30:05
Speaker 1: Yeah, I'll be sure to do it. And what about
30:09
Speaker 1: margin expansion opportunities.
30:12
Speaker 2: You know, we have actually been quite fortunate this year.
30:17
Speaker 2: We have an outstanding procurement organization and we have actually
30:24
Speaker 2: saved for the entire system more than seven figures in
30:28
Speaker 2: costs of goods sold. You know, and obviously there are
30:34
Speaker 2: things that are cyclic o. Bacon right now is getting
30:36
Speaker 2: really expensive. What was a year ago chicken wings were
30:40
Speaker 2: really expensive and don't even I'm so glad we weren't
30:44
Speaker 2: in the egg business, you know, eighteen months ago. I
30:47
Speaker 2: mean that was just nuts.
30:49
Speaker 1: And they're starting to poke their head up again.
30:51
Speaker 2: I know, I know. Pork prices you know, are are up.
30:59
Speaker 2: Cheese is actually come down, right, very strong tomato harvest,
31:07
Speaker 2: but prices on tomatoes for the last several years have
31:10
Speaker 2: been increasing. And so look rent, labor, cost of good sold, right, Okay,
31:21
Speaker 2: rents getting more expensive, cost of good sold. It's going
31:26
Speaker 2: to be cyclical, and I actually believe that we can expect,
31:31
Speaker 2: you know, patterns of the last ten years to repeat themselves.
31:35
Speaker 2: But labor is not getting cheaper, right, Labor is not
31:39
Speaker 2: getting cheaper. And the way you expand margins is by
31:44
Speaker 2: creating greater operational efficiencies eliminating non value added labor in
31:51
Speaker 2: your stores. What are you doing that the customer doesn't
31:55
Speaker 2: want to pay for? Right? What kinds of you know, Oh,
32:00
Speaker 2: we hand wash our dishes. Customer doesn't want to pay
32:03
Speaker 2: for you to hand wash your dishes. Just use a dishwasher, right,
32:08
Speaker 2: But that also includes you know, the experience itself. And
32:12
Speaker 2: so right now, you know, every Blaze Pizza you go to,
32:15
Speaker 2: if you're not placing your order online, you're talking to
32:18
Speaker 2: a greeder, you're talking to several employees down the line.
32:22
Speaker 2: Are there new ways to do that? Right? Of course,
32:25
Speaker 2: kiosks are here and here to stay, and we are
32:28
Speaker 2: experimenting with that. But even in the pizza production right
32:32
Speaker 2: and tying loyalty back to you know, remember when I
32:35
Speaker 2: mentioned to you, Hey, welcome back to Blaze Pizza. Mic,
32:39
Speaker 2: would you like the Mic Special? Yes? I would. Well,
32:43
Speaker 2: guess what if Mike wants the Mic Special, I've got
32:46
Speaker 2: the recipe. I don't have to hand him off to
32:49
Speaker 2: four or five people down the line asking him what
32:51
Speaker 2: protein he wants, what vegetable he wants, what Saucy wants, Right,
32:55
Speaker 2: I take the order all at once, and that's going
32:57
Speaker 2: to create efficiency for sure.
33:01
Speaker 1: Are there any other tech upgrades that you're testing and
33:04
Speaker 1: implementing right now?
33:05
Speaker 2: Oh? Yeah, you know, I obviously have a lot of
33:11
Speaker 2: experience with loyalty, having been the head of strategy for
33:16
Speaker 2: Starbucks and their app and their world class and they're
33:19
Speaker 2: one of the best.
33:20
Speaker 1: Yeah, nobody does it better.
33:22
Speaker 2: Nobody does it better loyalty apps are often when you
33:25
Speaker 2: have a high frequency of customer visit. Right. Where loyalty
33:31
Speaker 2: struggles is if your average customer only comes to you
33:34
Speaker 2: two or three times a year, and when the value
33:38
Speaker 2: of that loyalty and by the way, you know, seven
33:42
Speaker 2: to twelve percent is pretty much industry average of what
33:45
Speaker 2: the discount value is from a loyalty program. So just
33:49
Speaker 2: to make the math easy, let's call it ten percent. Okay,
33:52
Speaker 2: So that means one out of every ten visits I
33:54
Speaker 2: earn enough to get something free. Well, if that's something
33:57
Speaker 2: free is only worth ten dollars, Do I want to
34:01
Speaker 2: hold on to an app for three and a half
34:04
Speaker 2: to four years so that I get a ten dollars value?
34:08
Speaker 2: Doesn't make any sense, right, And so companies that don't
34:13
Speaker 2: have high value in their rewards and have low frequency
34:17
Speaker 2: a visit are not the ones who are winning in
34:19
Speaker 2: loyalty programs. They're the ones who are struggling with it.
34:23
Speaker 2: And so we have to seek opportunities to make it
34:26
Speaker 2: a more frictionless loyalty program, right, and that may mean
34:32
Speaker 2: a loyalty program that does not require you to have
34:35
Speaker 2: the app downloaded on your phone. I know who you
34:38
Speaker 2: are through other means, and every time you come to Blaze,
34:42
Speaker 2: I'm not waiting for you to tell me you're a
34:43
Speaker 2: loyalty member. I get to tell you that you are.
34:46
Speaker 2: And here's the reward for being that right and surprising
34:49
Speaker 2: to let you each time. So, yes, we are seeking
34:52
Speaker 2: that out. We're also seeking new operating equipment. Right. Yes,
34:57
Speaker 2: we are at one hundred and eighty seconds to make
34:59
Speaker 2: a pizza. Want to be faster. I want to be
35:02
Speaker 2: faster than that, right, I want to be able to
35:04
Speaker 2: produce more. I want to be able to produce more
35:08
Speaker 2: product with greater consistency. Looking at new oven technology. We
35:17
Speaker 2: are also looking at new technology in the stores to
35:21
Speaker 2: help track customer experience. Are they loving it? Are they
35:28
Speaker 2: liking it? Are they going to leave it? Or do
35:30
Speaker 2: they hate it? Right? What does that look like? On
35:37
Speaker 2: our web? We are looking at new web capabilities that
35:42
Speaker 2: will allow us to engage more personally with guests who
35:48
Speaker 2: come and visit us. New technologies in sharing with you
35:52
Speaker 2: information about the status of your order when you place
35:55
Speaker 2: it for either pickup or delivery. And it's not that
35:59
Speaker 2: we are creating anything new. We know what the great
36:01
Speaker 2: experiences look like. Right, Just look at Dominoes as an example,
36:05
Speaker 2: it's actually fun to know where your order is and
36:07
Speaker 2: they actually tell you the name of the person who's
36:09
Speaker 2: putting it in the oven. So yeah, we've got a lot.
36:13
Speaker 2: We've got a lot. In twenty twenty four is going
36:16
Speaker 2: to be a big year for Blaze Pizza in the
36:20
Speaker 2: IT department.
36:21
Speaker 1: Let's just say that all exciting stuff. Yes, sir, So,
36:26
Speaker 1: I got one last question for you. What are your
36:27
Speaker 1: biggest concerns right now?
36:29
Speaker 2: My biggest concerns, you know, it's not my controllables, Mike.
36:39
Speaker 2: It's not the things that I know I can do.
36:41
Speaker 2: It's the things that concern me that I can't control,
36:45
Speaker 2: and that includes you know, we talked about soft landing
36:51
Speaker 2: in a recession, I hope, so we talk about continued inflation.
36:57
Speaker 2: Most recent data is showing that in inflation is slowing
37:01
Speaker 2: faster in grocery stores than it is in the restaurant industry. Right.
37:06
Speaker 2: We've seen this in the past, where consumers choose to
37:09
Speaker 2: do more at home versus do more in the restaurant,
37:14
Speaker 2: continued guest experience in store versus out of store. I
37:20
Speaker 2: still think Blaze Pizza its best winning formula is when
37:23
Speaker 2: you come into the store and you create Mike's specialty, right,
37:28
Speaker 2: and you get to watch that pizza being made and
37:30
Speaker 2: fired up in one hundred and eighty seconds and added
37:32
Speaker 2: to you, and it's joyful. If we end up, you know,
37:37
Speaker 2: with another two thousand and twenty situation and customers and
37:44
Speaker 2: guests decide that they don't want to have that in
37:46
Speaker 2: store experience, we have to be able to adopt even faster.
37:51
Speaker 2: So it's the non controllables, Mike that concern me the most.
37:57
Speaker 1: For sure. All right, thanks again, Bettal. That was fun.
38:00
Speaker 1: Where can the audience go to find a nearby Blaze Pizza?
38:03
Speaker 1: Find some information, financial information maybe for franchisees, and what
38:08
Speaker 1: social media platforms is Blaze big on?
38:11
Speaker 2: Absolutely okay? So www dot Blazepizza dot com. You can
38:14
Speaker 2: go in there and actually find our store locator so
38:17
Speaker 2: that you can find a store nearest to you. You
38:19
Speaker 2: can also place your order directly on the web, or
38:22
Speaker 2: feel free to go to the Apple or Google app
38:24
Speaker 2: store and download our app and then you'd have it
38:27
Speaker 2: on your phone. In addition, onto the Blaze Pizza website,
38:32
Speaker 2: there are links to actually go into franchising opportunities, and
38:37
Speaker 2: so I encourage Anyone who has any interest, please do
38:39
Speaker 2: so reach out to us. We'd love to have you
38:42
Speaker 2: as part of the family.
38:43
Speaker 1: Very cool and big thanks to the audience for tuning in.
38:47
Speaker 1: If you liked the episode, please subscribe and leave a review.
38:50
Speaker 1: Check back in a couple weeks for a discussion with
38:52
Speaker 1: Justin Rosenberg, the founder and CEO of Honey Grow