WEBVTT - Marco's Pizza Tops $1 Billion in Sales

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<v Speaker 1>You're listening to Bloomberg Business Week with Carol Messer and

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<v Speaker 1>Bloomberg Quick Takes Tim Stinovic on Bloomberg Radio. The next

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<v Speaker 1>company we're gonna talk about was founded in nine headquartered

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<v Speaker 1>in Toledo, Ohio. We're talking about Marcos Pizza and now

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<v Speaker 1>has over a thousand stores in thirty four states, locations

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<v Speaker 1>in Puerto Rico and the Bahamas. The company recently notes

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<v Speaker 1>that it officially crossed the one billion dollar market annual sales.

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<v Speaker 1>So let's get more on the business, the growth. What's next.

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<v Speaker 1>Let's bring in Tony Lobarti, his president co CEO of

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<v Speaker 1>Marcos Pizza. He joins us on the phone from Florida, Florida.

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<v Speaker 1>Excuse me, Tony, how are you? How are you? I'm

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<v Speaker 1>doing well. I'm doing well. Tell me a little bit

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<v Speaker 1>about the business and and this achieving our achievement of

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<v Speaker 1>one billion dollars in annual sales. Why is this so

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<v Speaker 1>significant for your story and your story going forward? Well, really, Marco,

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<v Speaker 1>the Marco's brand is doing incredibly well during some very

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<v Speaker 1>difficult times the last two and a half years. As

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<v Speaker 1>you know, it's has been challenging, but we continue to grow.

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<v Speaker 1>Um we continue to see same our sales growth, unit growth,

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<v Speaker 1>average unit volume growth year after year, and we're pretty

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<v Speaker 1>excited about it. And really by crossing the billion dollar threshold,

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<v Speaker 1>we're really now concentrating on what more can we do

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<v Speaker 1>and be as a brand in our community. So we're

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<v Speaker 1>establishing our new Marko's Foundation, which is really a charity

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<v Speaker 1>foundation for our franchisees and team members to really be

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<v Speaker 1>a positive difference in our communities, focusing on things like

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<v Speaker 1>school and education, hunger prevention, and nutrition. Very slowed down

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<v Speaker 1>for a second, So I want to go You've got

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<v Speaker 1>a lot going on. I want to go back to

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<v Speaker 1>the growth in the business. Um, what is it? Is it?

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<v Speaker 1>Just because if I think about fast food, fast casual,

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<v Speaker 1>there's a lot of choices out there, and you know

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<v Speaker 1>they're not all alike. I feel like the pizza sector,

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<v Speaker 1>in addition to your local, you know pizza places in

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<v Speaker 1>various towns and cities. We certainly have a lot in

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<v Speaker 1>the city. There are some really well known chains that

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<v Speaker 1>you know, and newer ones entering. So why do you

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<v Speaker 1>think you're growing? Is it price point, is it your demographic?

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<v Speaker 1>What is it? Well? I think it's all of that.

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<v Speaker 1>We we've had an opportunity just recently to become the

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<v Speaker 1>fifth largest pizza chain. Um congratulations to our franchisees. We've

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<v Speaker 1>seen about a thirty six percent sales growth in the

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<v Speaker 1>last two and a half years. Um uh. And really

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<v Speaker 1>it started with our national advertising. We we became a

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<v Speaker 1>national brand on TV this year as an example, or

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<v Speaker 1>on TV for thirty two weeks. Uh. We really focused

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<v Speaker 1>on our digital footprint by rolling out a new app

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<v Speaker 1>and working on our web page, and and we were

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<v Speaker 1>able to take our digital our digital orders from twenty

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<v Speaker 1>five percent just three years ago to now sixty today.

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<v Speaker 1>Um uh. And of course we've got a great product

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<v Speaker 1>and we're really the brand that very few people knew about.

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<v Speaker 1>But as as we continue to tell our story and

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<v Speaker 1>we're out there with a great value proposition getting people

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<v Speaker 1>to try our pizza, we seem to be winning the fight.

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<v Speaker 1>And let's talk about delivery a little bit more. I've

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<v Speaker 1>seen the notes that you passed over that you've made

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<v Speaker 1>big bets on the future with a third party delivery platforms.

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<v Speaker 1>Talk to me a little bit about that decision to

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<v Speaker 1>go that route. Yeah, we we actually were earlier adopters

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<v Speaker 1>of the third party we felt pretty strongly that that

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<v Speaker 1>was a creative to our business. Those were different customers.

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<v Speaker 1>When somebody was deciding whether or not they were gonna

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<v Speaker 1>have lunch or dinner and they went to a door

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<v Speaker 1>dash or an uber each, they weren't thinking about Marcos UH,

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<v Speaker 1>and so we thought that it would it would help us,

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<v Speaker 1>and it has. In fact, we've grown that part of

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<v Speaker 1>our business by six percent between one UH and it's

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<v Speaker 1>up thirty six percent this year, so we'll do over

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<v Speaker 1>eighty million dollars and thirty part third party aggregated sales

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<v Speaker 1>and UH. It's been a big win. It's introduced our

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<v Speaker 1>brand to a whole set of customers that didn't know

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<v Speaker 1>who we were. Hey, I gotta ask you, um Tony.

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<v Speaker 1>One of the big things that we talked about with

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<v Speaker 1>anybody who runs a company, UH, and certainly in your

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<v Speaker 1>space inflation. We did see inflation prints that were much

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<v Speaker 1>more positive, coming in less than expected, but they're still high.

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<v Speaker 1>What are the inflation pressures that you're seeing when it

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<v Speaker 1>comes to labor costs and to food costs, Well, we're

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<v Speaker 1>seeing what the rest of the industry is seeing. When

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<v Speaker 1>we rolled through Q two, we had about increase in

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<v Speaker 1>overall food cost in in in Q two and P

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<v Speaker 1>seven at peaked at pent and you're right, we didn't

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<v Speaker 1>see it go higher here in the recent uh P eight,

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<v Speaker 1>but but is still too high. It's about five basis

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<v Speaker 1>points pressure on the bottom line for us. And while

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<v Speaker 1>we've been taking some pricing to try to mitigate UH

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<v Speaker 1>the inflation, we've really been focused on trying to just

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<v Speaker 1>take modest increase increases to ensure that we continue to

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<v Speaker 1>grow our market share and that that that's been difficult,

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<v Speaker 1>trying to balance the two of staying profitable for our franchisees,

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<v Speaker 1>but at the same time trying to be there for

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<v Speaker 1>our customers in our communities as a real value for them.

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<v Speaker 1>During sometimes well, let's talk about the franchise e. Like

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<v Speaker 1>Carol said, you know, you have many stores across the

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<v Speaker 1>US thirty three states, so you really see a lot

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<v Speaker 1>of the country there. And I'm curious, what is sort

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<v Speaker 1>of the common denominator when you think about what the

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<v Speaker 1>biggest UH sort of issues for your franchise ease or

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<v Speaker 1>I'm going to mispronounce that for the franchisees and what

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<v Speaker 1>is the biggest problem right now? Well, you know, it's

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<v Speaker 1>funny um uh it every year is challenging, but two

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<v Speaker 1>is proven to be a more difficult year than one.

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<v Speaker 1>If you remember we started with COVID. That was challenging

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<v Speaker 1>just getting stores open being essential, trying to keep your

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<v Speaker 1>team safe, and and and and and keep keep the

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<v Speaker 1>business moving. In one we had great, great resignation period.

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<v Speaker 1>We're trying to find help through the summer months and

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<v Speaker 1>through the through the fall and winter was extremely challenging,

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<v Speaker 1>just again to keep normal operating hours. And so we've

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<v Speaker 1>rolled that into two. And then here we go with

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<v Speaker 1>wage increases and and and in inflation. And I would

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<v Speaker 1>tell you that the two biggest challenges for our franchise

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<v Speaker 1>dase today, one is retaining and finding good help to

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<v Speaker 1>help them continue to grow their businesses and then again

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<v Speaker 1>managing their p and l um UH to a point

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<v Speaker 1>where we can continue our growth. And we've got about

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<v Speaker 1>two hundred and forty years so news stores and development

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<v Speaker 1>as we speak. We got about another hundred and fifty

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<v Speaker 1>of those right behind it, and so we'll be at

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<v Speaker 1>store brand and no time. So really we need people

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<v Speaker 1>and and UH we focus on that every day, both

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<v Speaker 1>UH our recruit efforts and our retention efforts are cultural efforts,

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<v Speaker 1>all those kinds of pay. Tony just got about twenty

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<v Speaker 1>five seconds here. Uh. We often talk about recession no recession,

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<v Speaker 1>based on what you're seeing and what consumers are doing.

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<v Speaker 1>What would you say, um, in terms of consumer spending,

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<v Speaker 1>what the economy looks like here in the US, Well,

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<v Speaker 1>I would tell you that they are, uh looking for value.

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<v Speaker 1>I will tell you that they are trying to feed

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<v Speaker 1>their families on on fewer dollars, and pizza is a

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<v Speaker 1>great place for them to do that. Uh, They're they're

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<v Speaker 1>being discerning in terms of number of items they're putting

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<v Speaker 1>in their basket when they're purchasing, and so keeping a

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<v Speaker 1>lid on price will mitigate the loss in the in

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<v Speaker 1>the item sold, and and and people are just really

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<v Speaker 1>trying to make ends meet. I didn't hear recessions and

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<v Speaker 1>no recession. Well, just quickly, we're in one. If we

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<v Speaker 1>if we believe we're in one, then yeah, it's coming.

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<v Speaker 1>But but pizza tends to do okay recession, so it's

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<v Speaker 1>not necessarily huge concern for us. All Right, we gotta run, Tony,

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<v Speaker 1>Thank you so much. Tony Lobarti, President and co CEO

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<v Speaker 1>at Marcos pizza,