WEBVTT - Little Caesar's 0:00:04.120 --> 0:00:07.520 Welcome to Business on the Brink, a production from I 0:00:07.680 --> 0:00:14.120 Heart Radio and How Stuff Works. Don your togas and 0:00:14.200 --> 0:00:17.320 prepared to get crazy crazy, because this week we are 0:00:17.360 --> 0:00:21.439 talking about Little Caesar's. This family owned company really found 0:00:21.480 --> 0:00:23.759 their niche with a baked in focus on bang for 0:00:23.800 --> 0:00:26.680 your buck. But in the nineties and early two thousand's 0:00:26.960 --> 0:00:30.160 things weren't looking so hot and ready for them, and 0:00:30.200 --> 0:00:33.320 they had to carry out new tactics to gain back 0:00:33.360 --> 0:00:36.560 their piece of the pie. Find out how on Little 0:00:36.640 --> 0:00:50.320 Caesar's on Business on the Brink. Hey everybody, I'm Jonathan 0:00:50.320 --> 0:00:54.160 Strickland and I'm Ariel Casting, and welcome to our Happy 0:00:54.240 --> 0:00:58.080 Pizza episode. I'm sure we'll have others. Yeah, I'm sad 0:00:58.120 --> 0:01:01.520 that we did not think ahead to actually get pizza 0:01:02.640 --> 0:01:06.840 because I am now craving pizza me too, and some 0:01:06.880 --> 0:01:11.839 crazy bread because I like myself some nice, cheap Little Caesar's. 0:01:12.120 --> 0:01:15.560 Yeah yeah, So this this came to us from Tony. 0:01:15.680 --> 0:01:20.000 He asked it we cover Little Caesar's, and uh, you know, 0:01:20.160 --> 0:01:25.440 Little Caesar's has a very quaint origin story. Quaint indeed, 0:01:25.480 --> 0:01:29.160 because Little caesar started out as Little Caesar's Pizza treat. 0:01:30.400 --> 0:01:33.640 It's adorable and it was founded in Garden City, Michigan, 0:01:33.800 --> 0:01:37.000 in May of nineteen fifty nine. Yes, and the founders 0:01:37.319 --> 0:01:42.440 of this restaurant, we're putting a pretty big risk here. 0:01:42.480 --> 0:01:44.800 I mean that this was like a big all in 0:01:44.959 --> 0:01:48.600 at the time. And you had Mike or Michael Ilitch. 0:01:49.120 --> 0:01:55.000 And he had previously been a professional as a ball player, 0:01:55.600 --> 0:01:59.320 baseball baseball player. I know you're a geek and not 0:01:59.440 --> 0:02:04.120 much of a sports buff, but elementary school education alright, 0:02:04.160 --> 0:02:07.880 Sorry sorry, I was more of a t ball so. Yes, 0:02:07.960 --> 0:02:11.240 he actually played for the Detroit Tigers and he would 0:02:11.320 --> 0:02:16.760 later uh spoiler alert team, yes, as well as a 0:02:16.800 --> 0:02:20.680 hockey team. But he his baseball career ended early because 0:02:20.720 --> 0:02:22.880 he had a knee injury and it took him out 0:02:22.919 --> 0:02:25.800 that we see that a lot with professional sports players. Sure, 0:02:26.000 --> 0:02:30.080 and rather than just sit back and and and you know, 0:02:30.400 --> 0:02:34.239 grouse about things, he thought, you know what we should 0:02:34.600 --> 0:02:37.840 we should open up a restaurant. Miama, my honey, bunny 0:02:37.880 --> 0:02:41.519 of a wife. Yes, I actually love how. The official 0:02:41.520 --> 0:02:44.440 company history of Little Caesar on their website states how 0:02:44.480 --> 0:02:47.880 the how the store got started. Yeah, so they say, 0:02:47.960 --> 0:02:51.240 quote the global chain that Little Caesar's is today began 0:02:51.280 --> 0:02:53.760 with a blind date between Mike Ilitch and Mary and 0:02:53.800 --> 0:02:57.280 Bayoff that was arranged by Mike's father in n Within 0:02:57.400 --> 0:03:00.680 just a matter of months, the couple was married. That's 0:03:00.720 --> 0:03:05.440 pretty amazing. It's adorable. Yeah. So they put in everything 0:03:05.480 --> 0:03:08.600 they had, which was around about at ten thousand dollars 0:03:08.800 --> 0:03:12.320 into opening up this first restaurant, So if it had failed, 0:03:13.160 --> 0:03:15.239 it would have been pretty disastrous for the couple. So 0:03:15.400 --> 0:03:19.320 fortunately our story does not open an end right here. No, 0:03:19.840 --> 0:03:22.679 that would be a sad episode for you guys. Yeah, 0:03:22.680 --> 0:03:24.800 and also you don't wonder how the heck did you 0:03:24.840 --> 0:03:28.720 even learn about this place to to cover it now? Instead, Uh, 0:03:28.840 --> 0:03:31.840 they opened up a restaurant which served pizza, but not 0:03:32.360 --> 0:03:36.240 just pizza. They served other stuff too, yes, like chicken, 0:03:36.400 --> 0:03:40.640 shrimp and fish. Yes, and pasta at some point, and 0:03:40.680 --> 0:03:44.600 they boasted fifteen minutes service. Yes. This was something that 0:03:44.640 --> 0:03:47.480 they built their brand on very early on. It was 0:03:48.160 --> 0:03:51.560 known as being fast and affordable. Yes, and there it 0:03:51.640 --> 0:03:54.440 was successful. The first week they sold two d and 0:03:54.520 --> 0:03:58.680 nine pizzas, So it was pretty successful pretty early on, 0:03:58.840 --> 0:04:00.600 and it didn't take very long, just a couple of 0:04:00.720 --> 0:04:05.800 years before they had an opportunity to open another location. 0:04:05.960 --> 0:04:09.480 And this meant that they had some decisions to make, right, Yeah, 0:04:09.520 --> 0:04:12.000 Because when we when we're looking at companies that want 0:04:12.040 --> 0:04:14.760 to expand, they can either put in the capital to 0:04:14.840 --> 0:04:18.640 open a second store or multiple stores out of their 0:04:18.640 --> 0:04:21.479 own money, or they can franchise exactly. Yeah, there's usually 0:04:21.520 --> 0:04:24.000 like one of three options. You open up a brand 0:04:24.000 --> 0:04:27.200 new location, you choose to franchise a location, or you 0:04:27.240 --> 0:04:31.000 purchase someone else's store and you turn it into yours. 0:04:31.360 --> 0:04:33.799 So in this case, they went with the franchise, which 0:04:33.920 --> 0:04:39.960 made incredible business sense, right. And this particular franchise opened 0:04:39.960 --> 0:04:45.599 in Warren, Michigan, and they also saw success through their 0:04:45.640 --> 0:04:49.520 their their franchise owner was also being successful following the 0:04:49.560 --> 0:04:55.280 same philosophy as the flagship store. Yes, and by nine 0:04:55.880 --> 0:04:57.760 a bunch of other people got on board. They had 0:04:57.880 --> 0:05:04.320 fifty restaurants. Yeah, so this was a pretty quick growing trend. 0:05:04.360 --> 0:05:09.080 They even expanded into Canada. So they had some people 0:05:09.200 --> 0:05:13.560 throwing down their hard earned loonies for pizza. Yeah. I 0:05:13.680 --> 0:05:17.280 would throw down some hard earned loonies for pizza if 0:05:17.279 --> 0:05:21.880 I earned loonies. Yes, we we were the buccaroos over 0:05:21.960 --> 0:05:27.120 here though. So then they decided that they wanted to 0:05:27.360 --> 0:05:31.320 have a better control over their supply chain and better 0:05:31.720 --> 0:05:34.360 control over the quality of the stuff that they were 0:05:34.360 --> 0:05:37.440 putting on their pizzas, which seems like a really good 0:05:37.480 --> 0:05:39.960 business decision, and it might have been for a while. 0:05:40.000 --> 0:05:44.280 We'll cover later how it has caused some issues going forward. 0:05:44.400 --> 0:05:45.800 But the way they did that was they bought a 0:05:45.880 --> 0:05:52.599 mushroom farm. Yes, so, uh, mushroom, mushroom, mushroom, mushroom pizza, 0:05:52.600 --> 0:05:59.280 pizza badgers, it's a snake exactly. Eventually that mushroom farm 0:05:59.320 --> 0:06:03.919 grew into Little Caesar's full service distribution company called Blue Line, 0:06:04.080 --> 0:06:06.880 called Blue Line, and it did help them manage costs 0:06:06.880 --> 0:06:10.560 for the campaign Little Caesar's was about to put in place. Yeah, 0:06:10.600 --> 0:06:13.560 it also meant that over time Blue Line would end 0:06:13.640 --> 0:06:18.000 up carrying a much wider variety of of stuff than 0:06:18.120 --> 0:06:21.880 just mushrooms, but that that ends up being part of 0:06:21.880 --> 0:06:25.400 our story later on anything more than mushrooms. I mean, 0:06:25.440 --> 0:06:29.080 if someone likes, I don't know, pepperoni on their pizza, 0:06:29.320 --> 0:06:32.080 it has been known to happen. I suppose you're right. Well, 0:06:32.120 --> 0:06:35.279 this is also right around the time where they made 0:06:35.320 --> 0:06:39.120 a decision that would also be associated with Little Caesar's 0:06:39.160 --> 0:06:41.919 moving forward, which was that they were switching strictly to 0:06:42.200 --> 0:06:45.080 a carry out pizza model. So you come in, you 0:06:45.120 --> 0:06:48.080 pick up your pizza, and you go. There's no delivery, 0:06:48.400 --> 0:06:53.040 there's no dine in. This has a few big advantages 0:06:53.120 --> 0:06:56.680 from a business standpoint. You know, your your operating costs 0:06:56.720 --> 0:07:00.680 are much lower, and Little Caesar's were typically the opening 0:07:00.760 --> 0:07:05.800 up in areas that were known for having lower income households. 0:07:05.839 --> 0:07:09.160 So by keeping those costs low, they could keep the 0:07:09.200 --> 0:07:11.680 price of the pizza low and thus be able to 0:07:11.720 --> 0:07:14.280 serve their communities. Plus not offering a place for people 0:07:14.280 --> 0:07:17.120 to sit and eat that they could have smaller footprints, 0:07:17.160 --> 0:07:20.000 so smaller stores, no weight staff, they had to pay 0:07:21.240 --> 0:07:25.920 smaller kitchens exactly. So and again that for once, the 0:07:25.960 --> 0:07:30.400 whole passing those savings onto you was really legit because 0:07:30.720 --> 0:07:32.560 I don't know if you guys are ever familiar with 0:07:32.600 --> 0:07:34.640 eating at Little Caesar's, but it did not set you 0:07:34.680 --> 0:07:38.000 back very far, about like five or seven dollars, Yeah, 0:07:38.080 --> 0:07:42.160 depending on what you wanted. Yeah. In nine this is 0:07:42.320 --> 0:07:46.320 very important, we got the pizza pizza catchphrase. Yes, so 0:07:46.760 --> 0:07:49.880 I was already a small child at that point, and 0:07:49.920 --> 0:07:52.960 that is why I will forever associate Little Caesars with 0:07:53.000 --> 0:07:56.480 pizza pizza. They get rid of that catch phrase later 0:07:56.640 --> 0:07:59.320 and then bring it back and we'll get into that now. 0:07:59.320 --> 0:08:03.480 This catch phrase put into place to promote their their 0:08:03.560 --> 0:08:08.000 new deal, I suppose, which was getting two pizzas for 0:08:08.040 --> 0:08:11.080 the price of one. Yes, and so you would you 0:08:11.120 --> 0:08:14.560 would get pizza pizza. You would pay the price for 0:08:14.640 --> 0:08:16.880 one pizza. You get twice as much pizza as you 0:08:16.880 --> 0:08:20.239 were expecting, which meant that you would get a pizza 0:08:20.280 --> 0:08:23.720 box so unwieldy that no one could fit it in 0:08:23.760 --> 0:08:26.720 their car. And everyone hated it. I mean, they didn't 0:08:26.760 --> 0:08:29.080 hate the two pizzas, that just hated the box. Yeah, 0:08:29.120 --> 0:08:32.760 And that actually is true. The boxes that they had 0:08:32.840 --> 0:08:38.880 to hold these pizzas were quickly a reviled item and 0:08:38.960 --> 0:08:42.920 eventually phased out. But the campaign was successful. It brought 0:08:42.920 --> 0:08:45.040 in tons of sales, and by the end of the 0:08:45.040 --> 0:08:48.720 seventies they had over two restaurants. Yes, and it was 0:08:49.280 --> 0:08:52.960 sort of the iconic ad campaign. You think of certain 0:08:53.600 --> 0:08:57.480 restaurant chains and certain ad campaigns just jumped to mind, 0:08:57.679 --> 0:08:59.920 like with for me, Wendy's is always going to be 0:09:00.000 --> 0:09:02.720 where's the beef? Like that just became one of those 0:09:02.720 --> 0:09:04.600 things in the eighties that you heard all the time 0:09:05.040 --> 0:09:09.400 and with the Kings your away. Yeah. Uh, Little Caesar's 0:09:09.520 --> 0:09:13.200 is pizza pizza, and McDonald's is Ronald will come for 0:09:13.240 --> 0:09:16.560 you in the night. I need my mommy, Okay. So 0:09:16.920 --> 0:09:21.960 by four Little Caesar's had expanded to four hundred locations, 0:09:22.080 --> 0:09:25.880 and just two years later that number had doubled up 0:09:25.880 --> 0:09:29.400 to eight hundred locations, callie, and they were hitting three 0:09:29.480 --> 0:09:33.280 hundred and forty million dollars in sales. Yeah, and uh 0:09:33.480 --> 0:09:39.559 by seven they had infected virus like all fifty states. 0:09:39.600 --> 0:09:43.560 We're looking at you too, Hawaii, more like penicillin like, 0:09:44.000 --> 0:09:46.880 well that also means Alaska. Yeah, yeah, they got all 0:09:46.920 --> 0:09:48.880 the way up. Well, they had already started going through Canada. 0:09:48.920 --> 0:09:51.440 It's it's getting through the Pacific that impresses me so 0:09:51.520 --> 0:09:56.480 darn much. Fair enough, And they started to also make 0:09:56.679 --> 0:10:01.560 a partnership with Kmart so that Little Caesar's could have 0:10:01.840 --> 0:10:05.040 an actual location within Kmart stores, similar to how you'd 0:10:05.040 --> 0:10:08.120 see a Subway or a McDonald's in Walmart, or like 0:10:08.600 --> 0:10:10.840 or often you'll see like Starbucks in a lot of 0:10:10.880 --> 0:10:16.520 different stores as well, and such. In the illages bought 0:10:16.520 --> 0:10:19.160 the Fox Theater in Detroit, not to be confused with 0:10:19.160 --> 0:10:22.680 the Fox Theater in Atlanta, No, but but equally opulent. 0:10:22.920 --> 0:10:26.080 The Detroit one is pretty impressive, it is. And they 0:10:26.120 --> 0:10:30.040 also bought office space right nearby and they renovated it 0:10:30.080 --> 0:10:34.679 into the Little Caesar's World headquarters. Yes, they also continued 0:10:34.720 --> 0:10:40.280 to maintain their original operating location back in in uh In, Michigan, 0:10:40.360 --> 0:10:47.160 so that would remain open for quite some time. But well, well, 0:10:47.240 --> 0:10:50.720 well when we get there will In the meantime, back 0:10:50.760 --> 0:10:55.000 in they added square pan pizzas to the menu, Pan 0:10:55.120 --> 0:10:57.960 pan Pan Pan pizza pizza. They would say, pan pan 0:10:58.000 --> 0:11:00.880 and the commercials I remember when they came out, yeah, 0:11:01.000 --> 0:11:03.800 and again the two for a price of one deal, 0:11:03.920 --> 0:11:07.439 thus the pan pan. And they also started advertising on 0:11:07.480 --> 0:11:13.560 the television, Yes, on the television the way the humans say, yeah, 0:11:13.600 --> 0:11:17.040 I wrote it as Telly, right, so then you said 0:11:17.080 --> 0:11:19.719 the television, but I am not British. So they were 0:11:19.760 --> 0:11:23.920 also spending about five of their revenue on marketing at 0:11:23.920 --> 0:11:27.920 this point, and things were going great, right, so like 0:11:28.120 --> 0:11:31.199 there was nowhere else to go but up. They had, 0:11:32.120 --> 0:11:37.240 you know, just started to hit their stratospheric climb and 0:11:37.360 --> 0:11:41.240 then there was nothing. Nothing was gonna stop them now, right, 0:11:41.880 --> 0:11:49.320 Well stop them, no delay them. Yes, well, we'll figure 0:11:49.320 --> 0:11:52.920 out more about what Aerials alluding to in just a second, 0:11:52.960 --> 0:11:59.800 but first let's take a quick break, all right. So 0:12:00.160 --> 0:12:04.720 in they reached two billion dollars in sales and they 0:12:04.760 --> 0:12:10.760 had four thousand locations or so, but they started experiencing 0:12:10.840 --> 0:12:14.400 losses that their sales dropped right after they hit their 0:12:14.440 --> 0:12:17.360 high in and continued to do so for the next 0:12:17.400 --> 0:12:21.480 eight years. And uh. Part of the research the aerial 0:12:21.559 --> 0:12:26.120 did when she was looking into this included a video 0:12:26.440 --> 0:12:31.680 created by Company Man and Company Man ends up suggesting 0:12:31.840 --> 0:12:37.240 three possible causes for this decline. Yes, one is competition, 0:12:37.760 --> 0:12:39.760 So there are a lot of different pizza places that 0:12:39.800 --> 0:12:42.080 were popping up all over the place, plus frozen pizza, 0:12:42.080 --> 0:12:46.400 plus other take home food options like cross the market. 0:12:46.760 --> 0:12:49.840 To a decrease in marketing because as sales dropped, Little 0:12:49.880 --> 0:12:53.760 Caesar's flowed their marketing down, and we'll get a little 0:12:53.760 --> 0:12:56.719 bit more into that. And then three franchise or dissatisfaction. 0:12:57.320 --> 0:13:00.640 And after reading about all this, I mean that it 0:13:00.679 --> 0:13:03.160 seems pretty cut and clear that that is what caused 0:13:03.160 --> 0:13:06.000 their decline. Yeah, so when we're talking about competitors, I 0:13:06.000 --> 0:13:08.280 mean there are a lot of different names that pop up, right, 0:13:08.280 --> 0:13:13.400 There's there's Dominoes, Papa John's, Pizza Hut, California Pizza, Pizza Kitchen, 0:13:13.440 --> 0:13:15.840 California Pizza Kitchen, and which you had both the physical 0:13:15.840 --> 0:13:19.640 locations and the frozen dinner versions. Uh, do jour know 0:13:19.760 --> 0:13:22.320 another one where you could go and then buy it 0:13:22.360 --> 0:13:24.199 at the store. So there were a lot of different 0:13:24.240 --> 0:13:27.800 options for pizza at a variety of different prices and 0:13:27.840 --> 0:13:31.640 availabilities that made things difficult. Then you had other like 0:13:31.720 --> 0:13:36.760 counter service type restaurants where all the foods already prepared 0:13:36.840 --> 0:13:39.199 you just go in and grab whichever ones you want, 0:13:39.240 --> 0:13:42.480 like Boston Market you had mentioned. So that was a 0:13:42.520 --> 0:13:46.640 big issue. I think that the the marketing thing is 0:13:46.800 --> 0:13:50.559 a really big one. To a lot of the the 0:13:50.600 --> 0:13:54.839 criticisms I read around this time said that a big 0:13:54.880 --> 0:13:58.680 issue was that the marketing firm, almost in a in 0:13:58.720 --> 0:14:02.640 a need to justify its own existence, kept playing with 0:14:02.760 --> 0:14:06.600 the marketing message for Little Caesar's, whereas Little Caesars, you know, 0:14:06.640 --> 0:14:10.959 it had such an identifiable marketing message this pizza pizza, 0:14:11.360 --> 0:14:15.240 low cost, super fast pizza. Uh, that some of the 0:14:15.280 --> 0:14:19.920 franchise franchise e owners were saying, why are you messing 0:14:19.960 --> 0:14:24.240 with this, you're confusing our brand identity. Well, I think 0:14:24.360 --> 0:14:27.200 part of it was when Little Caesar saw that their 0:14:27.240 --> 0:14:29.120 sales are declining, and they tried a bunch of things 0:14:29.240 --> 0:14:34.000 prior to really adjusting their marketing, uh like adding spaghetti 0:14:34.040 --> 0:14:40.600 to the menu, or giant giant long pizzas, uh, Pizza 0:14:40.640 --> 0:14:43.280 by the foot, Pizza by the foot. But at a 0:14:43.320 --> 0:14:45.520 certain point Little Caesar said, well, maybe it's our marketing 0:14:45.560 --> 0:14:47.560 because they had always had this, as you said, very 0:14:47.600 --> 0:14:51.760 identifiable but very tongue in cheek sort of campaign model. 0:14:52.000 --> 0:14:55.960 And so they decided to do an agency review. And 0:14:56.640 --> 0:14:59.440 originally their agency, Cliff Freeman and Partners, was going to 0:14:59.520 --> 0:15:01.440 play along, and then they said, you know it, no, no, 0:15:01.560 --> 0:15:03.120 if you want a new agency, we're gonna do it. 0:15:03.440 --> 0:15:05.640 So they got a new agency in and they're the 0:15:05.640 --> 0:15:07.800 ones who tried to focus on the value unless on 0:15:07.840 --> 0:15:12.880 the humor, and so Cliff Freeman might have been playing 0:15:12.880 --> 0:15:17.200 with the marketing message, and certainly with things like the 0:15:17.200 --> 0:15:20.520 the hot and Ready pizzas where you don't order and 0:15:20.560 --> 0:15:22.040 you don't wait for him, you just go in and 0:15:22.040 --> 0:15:25.000 pick up a pizza and spaghetti and things like that 0:15:25.680 --> 0:15:30.440 were hit and miss, But then they completely changed gears 0:15:30.480 --> 0:15:33.520 with a brand new ad company. Yeah, and that was 0:15:33.560 --> 0:15:38.400 where you started seeing franchise owners saying, uh, we're not 0:15:38.440 --> 0:15:41.320 seeing any benefit from this. This is we're we're having 0:15:41.360 --> 0:15:47.640 to spend money to pay into a marketing pool. Essentially, 0:15:47.720 --> 0:15:50.680 there was a percentage that franchise owners had to pay 0:15:50.720 --> 0:15:53.680 to go into this marketing pool, but they weren't necessarily 0:15:53.720 --> 0:15:57.400 getting any value back from the marketing, or at least 0:15:57.440 --> 0:15:59.240 that was their perception. Yeah. I think they had to 0:15:59.280 --> 0:16:03.000 pay four cent of their sales, which is advertising. You know, 0:16:03.160 --> 0:16:05.880 if you're if you're paying four of your revenue, but 0:16:05.960 --> 0:16:08.440 it turns out like what you're getting back, it doesn't 0:16:08.480 --> 0:16:10.640 you don't feel like you're seeing any benefit from that. 0:16:10.680 --> 0:16:13.560 Maybe you're saying, well, that might work in that market 0:16:13.600 --> 0:16:16.080 over there, but it's not working in my market. You 0:16:16.120 --> 0:16:20.880 start to get increasingly frustrated and angry because it feels 0:16:20.920 --> 0:16:23.080 like you're having to pay out money for something that 0:16:23.280 --> 0:16:27.120 is not benefiting. But that wasn't the only problem they had. They, 0:16:27.240 --> 0:16:30.000 like we said, Little Caesars was trying to adopt all 0:16:30.000 --> 0:16:32.720 these different things that were new and to bring people in, 0:16:33.040 --> 0:16:36.440 but they're also trying to take things away to save money. 0:16:36.560 --> 0:16:39.480 So at one point they had franchisers get rid of 0:16:39.520 --> 0:16:42.000 their soda fountains, which to me is crazy because if 0:16:42.040 --> 0:16:46.440 you look at any like any breakdown of how much 0:16:47.000 --> 0:16:49.920 soda costs to the customer versus how much it costs 0:16:49.960 --> 0:16:53.080 to supply, it's like one of the highest profit margin 0:16:53.240 --> 0:16:55.320 things out there. I mean, but if you've got someone 0:16:55.320 --> 0:16:59.520 who's not eating in store, yeah they may not. So 0:17:00.400 --> 0:17:02.160 it wasn't that was necessarily a bad idea, But they 0:17:02.240 --> 0:17:06.119 kept instituting all these changes, and at the franchise ER's expense. 0:17:06.480 --> 0:17:08.280 So they'd have to take out the fountain, they'd have 0:17:08.320 --> 0:17:10.280 to put the fountain back in. They'd have to start 0:17:10.320 --> 0:17:13.679 stalking spaghetti. They'd have to stop stalking spaghetti. They'd have 0:17:13.760 --> 0:17:16.000 to all of these things that they were having to 0:17:16.040 --> 0:17:19.800 do to try to meet Little Caesar's demands to make 0:17:19.880 --> 0:17:21.800 up for what they were losing because their profit margins 0:17:21.840 --> 0:17:24.240 were already pretty slim. Yeah, and you guy have five 0:17:24.280 --> 0:17:26.760 dollar pizza. And this is this is where we see 0:17:26.840 --> 0:17:31.320 the flip side of that franchise model, right, because on 0:17:31.320 --> 0:17:34.159 on the one hand, you're an independent store owner, but 0:17:34.240 --> 0:17:39.080 you're also beholden to the overall company. Uh, you know, approach, 0:17:39.600 --> 0:17:44.919 so you only have limited freedom as as a franchise owner, 0:17:45.160 --> 0:17:49.720 and if you don't have control over those decisions, then 0:17:50.119 --> 0:17:53.639 you are ultimately spending all this money without having a 0:17:53.800 --> 0:17:57.240 say in how that, you know, plays out, and it's 0:17:57.240 --> 0:18:00.320 your business. So it's super frustrating. They didn't even have 0:18:00.400 --> 0:18:05.520 a say in which distributors they used for ingredients, and 0:18:05.880 --> 0:18:08.440 so they couldn't even make up their costs by finding 0:18:08.720 --> 0:18:11.520 some super cheap ingredients. And they didn't even want you. 0:18:11.520 --> 0:18:15.360 I mean, it was affordable, cheap pizza. It was budget pizza, 0:18:15.440 --> 0:18:20.879 but it was also decent quality, right. It wasn't like 0:18:20.920 --> 0:18:23.000 it was you know, you take a bite and you 0:18:23.080 --> 0:18:25.879 get food poisoning type pizza. You didn't want to sell 0:18:26.040 --> 0:18:30.720 dollar cafeteria elementary school cafeteria pizza, right, which I do. 0:18:30.800 --> 0:18:32.159 Like I was about to say, I could really go 0:18:32.200 --> 0:18:36.119 for some cafeteria pizza right now. In it was getting 0:18:36.119 --> 0:18:39.720 so bad that the company essentially had to close four 0:18:39.760 --> 0:18:42.439 hundred stores. So remember when we were talking about how 0:18:42.480 --> 0:18:47.000 it doubled over that that like two year period they 0:18:47.040 --> 0:18:50.800 lost those four hundred, you know, in which if they 0:18:50.800 --> 0:18:53.920 had around four thousand is not the end of the world, 0:18:53.920 --> 0:18:56.280 but it is still really big chunk. Yeah, and I 0:18:56.359 --> 0:18:59.320 mean that still affects a large number of people. Yeah, 0:18:59.440 --> 0:19:03.760 six to nine thousand people in fact. So then, uh, 0:19:03.800 --> 0:19:08.360 the family, the Illage family, the founders of Little Caesar's, 0:19:08.400 --> 0:19:13.720 created Illage Holdings, Incorporated in order to better manage the 0:19:13.760 --> 0:19:19.760 family's assets, and Christopher, the son of Mike and Marian, 0:19:20.440 --> 0:19:23.479 became the CEO and Marian was the vice chairwoman. At 0:19:23.520 --> 0:19:26.840 that point, it wasn't enough, though, because by two thousand, 0:19:26.840 --> 0:19:29.639 franchises were so unhappy that two d and fifty of 0:19:29.680 --> 0:19:33.280 them filed a lawsuit against Little Caesar's. And this is 0:19:33.320 --> 0:19:39.120 where they specifically were saying that, uh, that four of 0:19:39.160 --> 0:19:42.800 the sales revenue going into the ad campaigns was objectionable, 0:19:42.840 --> 0:19:45.440 and they also said that they were they felt like 0:19:45.480 --> 0:19:49.040 they were being forced to use uh, low quality or 0:19:49.080 --> 0:19:54.600 subpar ingredients. Yeah. It's hard when you are business partners 0:19:54.640 --> 0:19:58.920 with a company and you don't feel like you can collaborate. Yeah. Well, 0:19:58.960 --> 0:20:02.800 the law suit lasted eighteen months and then Little caesar 0:20:02.880 --> 0:20:06.320 settled for a reported three d and fifty million dollars 0:20:06.320 --> 0:20:11.800 over ten years. And this also resulted in the franchise 0:20:11.840 --> 0:20:17.399 owners having the opportunity to choose a different uh provider 0:20:17.440 --> 0:20:20.280 than Blue Line, the distributor company that we were talking 0:20:20.280 --> 0:20:23.320 about earlier, the one that essentially was handling all the 0:20:23.520 --> 0:20:27.680 ingredient distribution for these franchise owners, and it also gave 0:20:27.720 --> 0:20:31.760 them a say in the advertising campaigns. So yeah, this 0:20:31.880 --> 0:20:36.560 was the restructuring of the relationship. Which is a very 0:20:36.600 --> 0:20:40.040 polite way of saying, whoop, see daisy, we've done We've 0:20:40.040 --> 0:20:42.480 done messed up. I don't know, I like whipsy daisy, 0:20:42.520 --> 0:20:44.360 we've done messed up A little bit better, I do too, 0:20:44.359 --> 0:20:47.600 But that's not the right corporate legal way of saying that. Apparently, 0:20:48.200 --> 0:20:51.160 the settlement did also include sharing some of Blue Line 0:20:51.320 --> 0:20:54.800 Blue Lines profits with franchisees and for giving some franchise 0:20:54.800 --> 0:20:57.680 e debt. Obviously, they got some of that debt from 0:20:57.680 --> 0:21:00.400 making all the changes that they were forced to make, right, 0:21:00.440 --> 0:21:04.520 So yes, essentially saying, we realized that we've put you 0:21:04.560 --> 0:21:08.359 through hardship with these rapid changes, and so here we're 0:21:08.359 --> 0:21:11.320 going to assume some of that that debt that you've 0:21:11.359 --> 0:21:15.639 accumulated as a result of of trying to agree to 0:21:15.680 --> 0:21:19.320 all those changes. By two thousand and one, they were 0:21:19.359 --> 0:21:22.360 only spending three million dollars on marketing, which you know 0:21:22.520 --> 0:21:26.240 for for that company, was a significant drop. In two 0:21:26.240 --> 0:21:31.439 thousand two, Kmart filed for bankruptcy and so a lot 0:21:31.480 --> 0:21:33.760 of them closed, which meant a lot of Little Caesars closed. 0:21:33.800 --> 0:21:36.639 And then beyond that, Kmart started replacing Little Caesars with 0:21:36.640 --> 0:21:39.560 their own little k cafes. Yeah, so this was another 0:21:39.720 --> 0:21:46.399 big blow to Little Caesar's overall. But while this marked 0:21:46.440 --> 0:21:50.800 kind of a low point, according to you, Ariel, this 0:21:50.880 --> 0:21:55.800 is where Little Caesar's was about to get better better, sorry, 0:21:56.040 --> 0:22:06.959 better better. Okay, we'll talk more about that after the break. Okay, So, Ariel, 0:22:07.080 --> 0:22:10.720 you mentioned that Little Caesar's was poised to get better better. 0:22:11.080 --> 0:22:14.520 How did that happen? Well, first, they got rid of 0:22:14.600 --> 0:22:17.720 their new ad agency now the one that was messing 0:22:17.720 --> 0:22:19.959 things up, and getting rid of all the humor. And 0:22:20.440 --> 0:22:23.280 again I don't think focusing on value was a bad idea, Yeah, 0:22:24.040 --> 0:22:28.840 but the method of messaging the actual like the fact 0:22:28.880 --> 0:22:31.560 that it lost a law of the personality that had 0:22:31.600 --> 0:22:34.320 set Little Caesar's aside, is probably what a lot of 0:22:34.320 --> 0:22:36.679 people point towards. Yeah, you never you don't have that 0:22:36.720 --> 0:22:39.760 brand recognition anymore. And by two thousand eleven they had 0:22:39.760 --> 0:22:42.360 increased their marketing budget back up to a little over 0:22:42.680 --> 0:22:45.400 twenty million dollars. Now, before we get to two thousand eleven, 0:22:45.400 --> 0:22:46.719 there's still a lot of stuff we've got to talk 0:22:46.720 --> 0:22:49.560 about in the early two thousand's. Yes, So in two 0:22:49.600 --> 0:22:54.640 thousand two, for example, they introduced a deep dish pizza 0:22:54.920 --> 0:22:59.080 for eight dollars. Deep deep, so deep that the eckos 0:22:59.640 --> 0:23:03.480 so keep they deeped it twice. That's that's okay, I 0:23:03.520 --> 0:23:06.000 take it back, keep it in, keep it in. So 0:23:06.040 --> 0:23:09.840 then we get the hot and Ready pizzas where you 0:23:09.840 --> 0:23:12.040 could get a one topping hot and ready in stuff, 0:23:12.119 --> 0:23:15.800 just a cheese pizza. Um, where again as five dollar 0:23:16.080 --> 0:23:18.560 type thing. And this this is one of those things 0:23:18.600 --> 0:23:20.840 I like. At this point, I was no longer eating 0:23:20.840 --> 0:23:24.239 Little Caesar's had moved on in my life, so I 0:23:24.320 --> 0:23:28.720 never really had the hot and ready type experience where 0:23:29.000 --> 0:23:31.680 you just walk in and I guess they had specific 0:23:31.720 --> 0:23:33.720 ones like these are the pepperoni pizzas, these are the 0:23:33.760 --> 0:23:37.320 cheese pizzas, and you descrab one. Yeah, I mean you can. 0:23:37.800 --> 0:23:39.680 Before you could order your pizza and you can pick 0:23:39.680 --> 0:23:41.040 it up. You could still do that, but now you 0:23:41.080 --> 0:23:42.760 have the option to just I just want a pepperoni 0:23:42.760 --> 0:23:46.159 pizza walk in, it's guaranteed to be there. And you know, 0:23:46.200 --> 0:23:48.760 I say, I've been saying all along five dollar pizzas. 0:23:49.080 --> 0:23:51.920 Their pizzas very in price, but these specific one top 0:23:51.920 --> 0:23:54.320 being Hot and Ready pizzas were five bucks and it 0:23:54.400 --> 0:23:58.240 actually has caused a little bit of consternation more recently, 0:23:58.320 --> 0:24:00.680 but we'll get into that, okay. But now they're back 0:24:00.680 --> 0:24:05.240 to what Little Caesars is known for, affordable value pizza, right, 0:24:05.280 --> 0:24:09.199 And they also decided to simplify. They moved to a 0:24:09.400 --> 0:24:13.600 one size for their classic pizzas, a one size for 0:24:13.640 --> 0:24:15.879 their deep dish pizza, so they didn't offer them in 0:24:16.080 --> 0:24:19.680 different sizes. Now, it was this is why it is. Yeah, 0:24:19.760 --> 0:24:21.800 you come in, this is the size that that that 0:24:21.880 --> 0:24:23.560 you're going to be dealing with. You're gonna get an 0:24:23.560 --> 0:24:25.440 extra large, whether you like it or not. At one point, 0:24:25.440 --> 0:24:28.880 they actually did increase their pizza size to be four 0:24:29.000 --> 0:24:32.280 inches larger than the standard pizza size, so small would 0:24:32.280 --> 0:24:34.719 be four inches larger than a regular small, their medium 0:24:34.720 --> 0:24:37.000 is four inches larger than a regular medium, so on 0:24:37.040 --> 0:24:40.800 and so forth. All of these positive steps back in 0:24:40.840 --> 0:24:42.880