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(Ambrosio’s note: Once in a rare while, I get a chance to interview a franchise executive who so genuinely believes in the profit potential of his franchise, that I can’t help but be excited by the opportunity too. Brett lays down a very logical case for why the Toppers Pizza franchise is a good investment and he really won me over. There have been occasions in the past when I finish an interview feeling like all I got was marketing-speak. But this interview is different — it’s all meat, no fillers. If you’ve ever considered opening a pizza franchise, this is one interview you shouldn’t miss.)
Brett Larrabee started out as a Subway franchisee back in 1986 and built 6 Subway stores. He went on to work with several franchise companies in Florida – Circle K and Burger King, to name a few. Brett became the Franchise Director at Panchero’s for several years and then the Director of Operations with Five Guys in New York City, before coming to Toppers Pizza as Director of Franchise Development.
1. What made you decide to join Toppers Pizza as Director of Franchise Development?
There are a lot of companies that franchise their concept but I’ve learned through the years that there are very few franchises that have a business model that creates wealth for their franchisees. Many of the food franchise business models expect franchisees to provide a large part of the labor in order for them to get a paycheck. Essentially, it’s just like buying a job, and I’ve always felt that a lot of those folks could have just gotten a job and invested their money in the stock market and done better.
But there are a handful of franchise companies that have the right business model to create wealth. Five Guys Burgers has taught me that that there’s a sweet spot in the food franchise business — one that requires about $400,000 in investment, a store buildout under 2,000 square feet, and average unit volume around $950K to $1 million. Five Guys did that and their franchisees have created a fair amount of wealth for themselves in operating that franchise format.
When I left Five Guys, I looked at the field of opportunities and Toppers was the most similar to Five Guys. Instead of a better burger category, it’s a better pizza category.
So this unit economics thing, which is really what I want to underline, is the key to why I came here. Franchisees can do, on average, $950K in unit sales and net $160K in ebitda (Ambrosio’s note: in case you are not familiar, this is an accounting term that stands for earnings before interest, taxes, depreciation, and amortization) — that’s an investment worth making. I really felt this was a good opportunity to expand an already mature business model because, after all, Toppers Pizza has been around for 20 years.
2. Why should someone interested in owning his or her own business consider a pizza franchise?
Well, I’m not so certain that the answer is specific to pizza, although pizza and burgers are two of the most prolific food products in America. If you take those two categories, they eclipse many of the other categories combined. So, it’s one of the categories with the greatest consumer demand. For instance, I was in burritos before – and Mexican food is great – but it’s not even a quarter of what the pizza category is as far as volumes.
The truth is that the pizza industry, although it’s pretty mature, is very old and stale. The major players compete on price to win customers and I feel that pizza has become more of a commodity type product. When that happens, there’s always an opportunity for someone to come in with higher quality, better service, more unique branding and customer experience, and the customer will pay two, three, four dollars more because they feel they’re getting more value. That’s what Five Guys Burgers did and that’s what Toppers is doing in the pizza category.
Well, Toppers is this eclectic, fun, energetic brand that has all of this great humor and connection with a niche customer base, which is the psychographic profile of 18 to 34 year olds, and we pursue this niche aggressively through our marketing programs. Our marketing program creates a high level of consumer recidivism that I just haven’t seen before and it allows us to go into markets where our brand is unknown, gain a customer base very quickly, and enable our franchisees to operate at a very decent gross volume and profit handsomely.
I think the energy and the character of our brand speaks directly to our customer niche. We have an incredible product — it’s worth paying a few bucks more for. But I really feel people are attached to our brand because of the whole system — it’s the experience, the way we answer the phone, how quickly we deliver our pizza, and how friendly and energetic our people are. It’s a very unique brand that is able to grow into a number of markets because our competitors are kind of old and stale and really only pursue a low price point, while we’re pursuing more of a quality experience to provide value to our core customer.
4. What qualities do you look for in a prospective franchisee?
We’re looking for franchisees who emulate Toppers — folks that Toppers employees would want to work for so they can recruit the very best staff; are energetic and enthusiastic; and have the potential to be great leaders and brand ambassadors. We’d like to have franchisees who have the financial wherewithal to build at least 1 store and have some business experience and acumen that they can bring to their Toppers investment.
We pursue all types of territories and neighborhoods. We started out as a university or a college type business but we really found over time that we can do just as well in a dense neighborhood of 20,000 to 30,000 households that have a large percentage of our core customers.
We have a very definitive database that allows us to define who our core customers are through their psychographic profile and we move into neighborhoods that have this type of person. Typically, these neighborhoods are young, middle income, dense, typically urban neighborhoods, but we also go into mid-sized towns with or without a college. We’re just looking for that density of households that gives us enough core customers to sell to.
6. Based on your observations, what concrete steps do your most successful franchisees take in order to build and grow their businesses?
They follow the marketing program and the operating system that we lay out. I think having the financial wherewithal and following our system from day one enables our franchisees to get up and running quickly without making expensive mistakes, and bring in a defined customer base that will stick with them and come back time and again. So it really comes down to someone who believes in and follows Toppers’ operations and marketing systems.
We provide a quarterly marketing program that instructs our franchisees how to effectuate the marketing program on a daily basis. We provide them with operational tools to help their business be more efficient and effective at managing costs and labor. And we negotiate and pursue very low cost contracts for food and beverages and other supplies that franchisees need.
8. What would you tell a prospective franchisee who wants to know about the profit potential of a Toppers Pizza franchise?
Our average annual per unit sales is $941,501 and our average annual per unit net profit is $161,998. By comparison, these are incredible volumes and ebitda numbers, not only in the pizza segment but in the food franchise industry as a whole.
9. Can you describe your typical day as Director of Franchise Development for Toppers Pizza? What do you enjoy most about your job?
My typical day consists of fielding phone calls from all over the country — frankly, from all over the world — from people that want to become Toppers franchisees. My job is to get to all of these people and find the best fit for Toppers.
The best part of my job is developing these relationships along the way and making great lifetime friends. These are people that I’ve been able to help create businesses for themselves and their families and really just getting to know them on a personal level has been very gratifying.
Toppers Pizza is this incredible business model that is mature and simple, yet effective and fundamentally profitable. What I mean by that is it’s scalable. Many of the food franchises out there have a model where the individual franchisee has to really work as a manager in the business in order to gain any profit from it. At Toppers, the volume and ebitda numbers that I pointed out is with a paid manager, 2 assistant managers, and some shift leaders. So somebody could build from one to a hundred stores and still benefit from the same business model without having to trade time for money. And I think that’s a big deal because you can scale this business profitably and effectively with a good return on investment.