Pizza, Por Favor

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LATIN LESSONS: Founder Antonio Swad (below) has geared everything about Pizza Patrónñfrom the store design to bilingual signs and staff and the price pointsñtoward capturing Hispanic business.

PIZZA PATRÓN BUSINESS PLAN CONCEPT: Value-priced pizza, carryout only, Latino neighborhoods. LEADERSHIP: Antonio Swad, president; Andy Gamm, director of brand development. LOCATIONS: 16 open in Texas and Colorado; 116 open/under development as of June 2004. EXPANSION PLANS: on track to open one new store a week at beginning of 2005; two a week by the end of 2005; goal of 500 open by 2007. AVERAGE CHECK: $11-$12 for two large pizzas and two liters of soda.

VALUE PROPOSITION: In-house dough and sauce production keeps food costs substantially below that of national brands.

For years, Latinos have shown up as a little blip on most marketers' radar, but that all changed after the last U.S. census. Now, along with Asian immigrants, they represent the fastest-growing segment of the U.S. population. The message is clear: Ignore Spanishspeaking Americans at your own peril.

Antonio Swad, who spent the last decade incubating the Wingstop concept before selling it last spring, thinks now is the perfect time to get an edge in this exploding segment. To do so, he's resurrecting a brand that predates Wing Stop but may have been an idea before its time: Pizza Patrón.

Swad cooked up the Pizza PatrÛn concept when he moved to Dallas in 1986 and opened a pizza place in the Pleasant Grove neighborhood. He quickly discovered that the core clientele spoke mostly Spanish. In a hurry, Swad decided, “we needed to modify the concept. The first thing we did was recruit bilingual employees. Then we changed the name (originally Pizza Pizza, predating the Little Caesar's tagline) to Pizza Patrón.” Bilingual menus were printed as well.

Building on the success of the original store, Swad opened three more locations in Dallas before he became preoccupied with Wingstop, a value-oriented fast casual brand that he launched in 1994. For the following decade, he invested most of his time and energy into building that system. But in the spring of 2003, Swad sold it, he says, even though “it was a perfectly healthy company with unbelievable momentum. I sold it to get back into the pizza business and develop my dream, which is making Pizza Patrón the dominant brand in our segment.”

Birth of a Brand
Andy Gamm, a former advertising executive who had collaborated with Swad on promoting Wingstop, joined Swad's team to head up development. He says the time to cultivate a Latinocentric pizza brand had arrived. “(Swad) knew there was a window of opportunity to develop the Pizza Patrón brand beyond where it was,” he explains. “Because there is more awareness of the growth in the Latino population, more money is being spent by larger companies on advertising to them, and that trend will continue to increase. Pizza Patrón has been doing business for so long in Latino communities that we knew we needed to take advantage of the ability we had to develop a national brand and start putting our time and energy into making something out of Pizza Patrón.”

First things first: Swad and his teamña corporate staff of fiveñ put the brand identity under a microscope and figured out how to give it broad appeal as a national chain. The results took shape at a new prototype unveiled in October 2002 in headquarters town Garland, TX. The new space was dressed up with Latino background music, Latinspiced dècor and bilingual signage promising “Pizza Ahora” ñpizza now. The “patrón” iconñ a benevolent community overseerñbecame more prominent. Potential franchisees have responded well to the tweaked concept. From four locations at the beginning of 2003, the brand is on track to have nearly 50 units open by the end of this year throughout Texas, Arizona and Colorado. By early 2005, the chain should be opening about a store a week; a year from that, development plans call for doubling that pace and opening in markets across the country that have neighborhoods with a critical mass of Spanish-speaking residents.

Gamm says census figures suggest room for at least 750 units, “and that's a very conservative number.”

Pizza Patrón could probably expand faster if not for the company's insistence on working with development partners committed to the idea of a Latino brand. “For our brand to develop in different markets, we have to make connections with the Latino community,” Gamm says. “There has to be a huge commitment by our partner not only to make an effort to run the business our way but to be involved in the Latino community.” So far, the chain has signed on a handful of experienced Latino restaurant operators along with non-Latino licensees who agreed to work with Spanish-speaking partners.

Personalizing the Pizza Experience
PIZZA PATRÓN IS MORE THAN JUST INEXPENSIVE TAKE out pizza. The concept has been carefully engineered to create an emotional bond between each store and its potential clientele in a variety of ways. For instance:

• The colorful architecture and interior paint colors, weathered mural, Latin music playing inside and outside and “Viva Patrón” slogan evoke Latin American destinations. The idea, Gamm says, is to create a distinctive experience even though the total visit may only last a few minutes.
• Employees who come in contact with customers must speak Spanish and English. “They must be prepared to speak whatever language the customer wants to speak,” Gamm explains. Often, “Mom and Dad don't speak English, and they have to order through their children. We create a comfort level by simply having a bilingual staff in place. That's a big deal to our customers.”
• Menus are bilingual, but storefront graphics are often in Spanish.
• Pizzas come in the usual varieties and the standard toppings, although chorizo was recently added to the options, because Latinos don't show any quirky preferences when ordering. The price point is a deliberate point of difference. “A lot of families can't afford to have Domino's delivered, but they can afford to make us part of their weekly ritual. Dad can become a hero,” Gamm says.

Low menu prices reflect a philosophy that separates Pizza Patrón from its heavy-hitting brethren. The low pricesñthe most expensive choice on the menu is $6.99ñare possible because each store makes its own dough and sauce from scratch. Unlike the better established national brands, which require franchisees to purchase shells, “with our stores, you get the flour and raw ingredients, and when you need more dough, you make it. We're able to keep the costs very low. It would be impossible to maintain the price points we're at without doing that,” Gamm says.

National pizza chains are actively pursuing the same Latino market, but with a different tack. Essentially, they are offering the same product they offer nationally, but spending money on Spanish language advertising. Swad is confident his approach will pay off in the long run.

“In the eye of our customers, Pizza Patrón is a brand that resonates with them in a way Pizza Hut or Domino's never will,” Swad says. “They can buy expensive ads, but (they are) still Anglo brands, and they always will be.”

Besides staying keyed in on the core audience, Pizza Patrón's management is committed to keeping the concept simple. “We get pulled in all directions,” Gamm says. “We're told if we stayed open a few more hours or added menu items, we could do more business. But we've watched other concepts make the mistake of forgetting who they are and losing focus, and then seen their brands decline. We want to be known for what we do best and not for being everything to everyone.”

ON THE MENU Large (15-in.) cheese pizza With one topping $4.99 With 2-3 toppings $5.99 4 or more toppings $6.99 Half pizza with cheese With one topping $3.49 2-3 toppings $3.99 4 or more toppings $4.59 Specialty pizzas (all $6.99) La Patróna: pepperoni, black olives, sausage, Canadian bacon, ground beef, bell peppers, mushrooms and onions La Hawaiana: Canadian bacon, pineapple, extra cheese La Mexicana: Chorizo, ground beef, bell peppers, onions and jalapeños Why half pizzas? 1. better value (it's equal to an 11-inch round) 2. a distinction between Patrón and other pizza brands

Chasing Hispanic Dollars An oft-cited nugget of trivia: Hispanics in the U.S. outnumber Canadians in Canada. Nearly 39 million strong and representing 13 percent of the total U.S. population (2002 figures), this group now tops the list of ethnic minorities. And their ranks are expanding at 9 percent a year, quadruple the rate of the general population. “No one really has a handle on how large the segment is and how fast it's expanding,” Pizza Patrón's Antonio Swad says. “It's like trying to get in front of a huge snowball running downhill.” According to I-Latina, a New York boutique advertising agency that targets Latino audiences, the purchasing power of that audience is growing along with its numbers. More than 70% of households had income of $30,000 or more in 2002. 54% of them say they are loyal to brands. Their age profile is younger than the general marketñ25 years versus 35. They have larger familiesñ3.4 members instead of the average 2.5, and almost half with 4 or more members. They hold more full-time jobs than the average population. Worldwide, more than 400 million Spanish-speaking consumers live in 23 countries. Spanish is the third most-spoken language. How can restaurant operators cash in on this already huge and booming market-segment? Spanish-language advertising is a good start, says Filiberto Fernandez, a partner with Hispanic Galaxy, a Boston firm that helps U.S. brands make a name in the Spanish-speaking world. He says about 40 percent of Hispanics in the U.S. speak only Spanish, 15 percent speak only English and the balance are bilingualñbut many of them prefer to speak Spanish. They also appreciate restaurants that can accommodate their larger households. “Being able to seat six people rather than four is important,” Fernandez says. And they don't like bland food, so hot sauce is a welcome addition to the salt and pepper shakers at the table. Among restaurant chains, McDonald's and Burger King are doing remarkable jobs reaching out in Spanish, Fernandez says. “They're part of our culture now.”

Will It Fly? Pizza Patrón's limited operating hours and carry-out-only service are big pluses, says Dennis Lombardi, executive vice president with Chicagobased Technomic. “Those two things help the unit economics substantially. They also help with the value positioning, which is a substantial price point below the national brands.” Lombardi also thinks the price is attractive enough to appeal to an audience well beyond the Hispanic community. One potential threat could materialize if Pizza Patrón gets too influential. “Then, the national brands might go back to a stronger value position to compete,” Lombardi observes.