Pizza Go Home: delivering satisfaction

In 1993 when Pizza Go Home opened its first outlet in Prague 7, the firm had to win over its first customers. From one branch, the company grew into eight outlets covering the entire city and turning out CZK 50 million in revenue in 2002.

WHEN CZECH Miloš Burkhardt (40) and his German friend Kurt Winkels (53), both of whom had experience as owners of restaurant and fast food chains in Germany, decided to start a business in post-socialist Prague, their idea was to create a gastronomic center that would introduce to Prague a new service – non-stop food delivery. According to Burkhardt the initial plan was to eventually cover all of Prague, so that at any time from any place one could call and have pizza (or chicken and beverages, including Italian wines) delivered to his or her door. “Such services existed everywhere in the West but not in the Czech Republic,” recalls Burkhardt.

Pavel Šustek

The partners invested their initial capital into purchasing and reconstructing a building in Holešovice, as well as buying technologies for producing original Italian pizza. “The beginning was very interesting and even funny,” remembers Pavel Šustek, the company’s director since the time of its foundation. The most frequent questions that came from customers were: “Why is the pizza so thin?”; “Why does it contain so little dough?”; “Why does it cost 100 crowns?”; “Why don’t you deliver dumplings with pork for 40 crowns?” The firm survived mainly thanks to foreign companies that started doing business in the Czech Republic and were already familiar with the concept of food delivery. Gradually people started coming in from the street. “They saw that this works, and sometimes when they came home after a weekend and saw that they have nothing to eat, they would pick up the phone and call us,” says Šustek. He explains that from the very beginning the idea was not to be in the very center, in some popular places where mainly tourists go. It was meant as a service for customers in particular Prague districts. The owners wanted to educate the Czech clientele.

Building a chain
With the growing awareness of Pizza Go Home, the company expanded as well. Every year a new subsidiary was opened. By 1997 there were already four; the business was getting more spread out and required unification. So far each outlet had a separate telephone number and the company did not have any central operator. The idea was to unify preparation of ingredients thus making supply logistics easier. “We wanted to have mozzarella grated in the same way and the same quality of tomato sauce at all outlets,” says Šustek. A subsidiary opened in Modřany in 1997 was the first step in this direction, as part of it serves as a central workshop.

Benchmark
- introduced a novel concept
– emphasis on high quality of product
– aimed at covering all districts of Prague
– central dispatching to reduce delivery time
– franchising used to expand and stabilize chain

And the changes continued. In 1999 Pizza Go Home invested over CZK 6 million into improving the quality of service and organization. It bought new technical equipment, including computers and sales-support software, in order to set up dispatching. The same year the company bought Škoda Felicias and motorcycles, as well as communications technologies. Drivers received radio transmitters, and the improved dispatching made it possible for the company to have just one telephone number for customers to remember. After an order is received, an operator transfers it to the closest subsidiary so that a customer can be served as quickly as possible. According to Šustek, delivery time ranges from 20 to 50 minutes depending on the customer’s location. Pizza is always prepared fresh and delivered still warm. It is also possible to place an order electronically through the company’s web site. Šustek says that about ten percent of all orders come electronically.
Currently Pizza Go Home’s eight subsidiaries produce 30,000 pizzas per month. The service is out here for customers 24 hours a day, but naturally it is busiest during lunch and dinner time. In a standard stove it is possible to cook four large pizzas at one time. Pizza Go Home has even larger stoves that can contain eight or 10 large pizzas and is able to divide even larger orders among its several restaurants.

Mapping out the future
Šustek estimates that by now about 45% of their initial investment has already returned. In 1999 Pizza Go Home was contacted by a company that had monitored the Czech firm and its activity. The negotiation did not lead to any specific financial offers, but Šustek does not rule out the possibility of buy-out in the future. The Czech Republic’s entrance to the European Union is imminent, which makes companies think about how new market conditions will affect their business. Šustek is aware that multinational companies doing what Pizza Go Home does may enter the market. However he also points out that the more subsidiaries a company opens the more stable it becomes, which seems to fit in with the firms’ game plan. So far the company is keeping up with Burkhardt’s vision to cover Prague by 2005, which means operating a total of 12 subsidiaries, so that outlets would be not much more than three kilometers apart from each other.

 

Franchising featsIn 2001 Pizza Go Home started franchising – five out of the company’s eight subsidiaries are now franchises. “Their task is to maintain the company tradition and even make it better with their individual approach,” says Pavel Šustek, Pizza Go Home’s director. When the company reached 100 employees and had a central management, checking became a problem, he explains. “It is easier to check the store’s quality and staff performance managing 10 people than 100 people,” Šustek adds. He also says that the firm never franchises newly open subsidiaries, but operates them itself for one or two years. Some subsidiaries need three months to become self-sufficient while some need a year or more.
All franchisees are former employees. “Usually these are people who don’t have great initial capital, but they know our operations and how it works.” Franchisees are not required to make a lump-sum payment when they take over a subsidiary. An agreement may be reached whereby they pay the main company up to CZK 200,000 in monthly installments for a given period of time, depending on the branch’s turnover. After the sum is paid off, all revenues go to the franchisee.

 

Promo strategyPizza Go Home invests up to three percent of annual turnover into advertising – mainly for radio commercials. When the company started, it effectively cooperated with city authorities advertising in their informational monthlies. “We got in touch with them and told them that we are introducing this service for citizens. They wrote an article about us and afterwards we followed with some advertising,” says Pavel Šustek, company director. In addition, Pizza Go Home participated in events organized by authorities in kindergartens and schools. The company managed to increase sales by up to 20% thanks to radio consumer contests, like the “Biggest Eater of Pizza” contest held on Zlatá Praha in 2001, where the main prize was a Škoda Fabia.
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