The Pizza Industry: 2020 Report

The Deep Dish on Pizza Chains During COVID-19

From tens of thousands of immediate hires to permanent store closures, the pandemic's far-reaching impact on pizza chains has been topped with record-shattering successes and halting disappointments. Being a popular and delicious food item that can feed several people for a reasonable price, it's no surprise that pizza has catapulted to the top of the pandemic comfort food pyramid, with delivery-driven concepts grabbing a big slice of the pie.

Pizza chain responses to COVID-19 have varied, but most have expedited their new-hire processes, with some hiring through texts and others streamlining training. The pandemic has also affected delivery systems. In addition to Postmates and DoorDash, Papa John's recently added Uber Eats as another third-party partner, while Domino's has rejected all third-party delivery providers with the aim to improve their carryout business, bolster wages for drivers and franchisees, and lower delivery times and radiuses. From bankruptcies to ingredient shortages, our pizza report is here to give you the scoop.

The Rise & Fall of the Hut

Pizza Hut began the year optimistically, announcing 30,000 new openings nationwide in March. The pizza chain emphasized customer and employee safety by offering contactless delivery, curbside pickup, and contactless carryout. Available jobs included everything from cooks and shift leaders to restaurant managers and virtual call center agents, and of course, delivery drivers. To expedite the hiring and onboarding process, Pizza Hut sped up its training procedures. Drivers were trained and making deliveries within five hours – about three times faster than trainings pre-pandemic. The chain also extended the availability of seasonal oversized items, meeting the demand for larger portions to feed more mouths.

In addition to its focus on hiring, Pizza Hut also conducted community outreach, bringing pizzas to healthcare workers, essential personnel, and those dealing with food insecurity.

The pizza chain is working with its longtime food recovery partner, Food Donation Connection1, to donate food to those in need. Partner charities make weekly pickups, collecting Pizza Hut's leftover buffet items, no-show pizzas, and error pizzas and bringing them to families in that area. The chain has coordinated over 94 million pounds of donated food, donating 5 million pounds to 2,500 domestic charities every year.

Additionally, Pizza Hut's partnership with the literacy nonprofit First Book2 has resulted in the contribution of more than 55,000 books to communities since March 16th, and the chain is providing free educational resources and materials for parents through the BOOK IT! Program3.

Before the pandemic, Pizza Hut had been progressively shying away from its dine-in features, focusing on delivery and takeout – a decision that was accelerated when COVID-19 struck. The chain reported its highest average sales week in the past eight years during May 2020.

Unfortunately, Pizza Hut experienced a setback in July with the loss of an estimated 300 franchised locations, when the pizza chain's largest U.S. franchisee, NPC International, filed for Chapter 11 bankruptcy4 after struggling with a debt of about $1 billion. Most of the closures are expected to be dine-in locations, and NPC will sell its remaining 927 Pizza Hut locations. NPC's restaurants accounted for one-fifth of the chain's U.S. locations. Employees at closed locations will be moved to open ones, though closed locations have yet to be determined.

California Pizza Kitchen's Dining Room Woes

To restructure its long-term debt, California Pizza Kitchen (CPK) filed for Chapter 11 bankruptcy in July, though the fast-casual chain promised to remain open. Founded in Beverly Hills, California, by two former federal prosecutors, the pizza chain has been operating for more than 35 years. CPK is known for its hearth-baked pizzas and fresh, unique ingredients, bringing a taste of California across the U.S. The chain has more than 250 locations in 11 countries and their pizzas can be found in most frozen food aisles.

Because CPK couldn't convert dining rooms to takeout locations, it was forced to close 46 restaurants permanently at the beginning of the pandemic. This loss, coupled with a devastating drop in sales, has forced the chain to cease rent payments at many of its locations, postpone renovations, furlough almost half its employees, and cut corporate pay by 35 percent.

While more locations may close, CPK expects to remain open and exit bankruptcy within a few months, restructuring the company to reduce its debt by $230 million. If thin-crust pizzas are your frozen pizza of choice, don't worry: The chain's presence in grocery stores should remain steady.

Marco's Pizza Marches On

Marco's – the only major U.S. pizza restaurant founded by a native Italian – makes its dough daily on-site with a fresh proprietary cheese blend and secret sauce made by founder Pat Giammarco. Since 1978, the pizza chain has become one of the U.S.'s fastest-growing franchises, opening a new restaurant every 3.5 days. In 2019, Marco's Pizza was intent on opening its 1,000th location in early 2020, along with an additional 125 to 200 locations expected to open by the end of the year.

Marco's opened its first location in Puerto Rico in 2015 and doubled its footprint on the island to 34 by the end of 2019. Latin America became their new market, and the chain aims to add 50 international locations by the end of 2025 in countries such as Jamaica, Costa Rica, and Mexico. Also in 2019, the pizza chain's brand equity increased by 10 percentage points, outscoring all other pizza restaurants; it ranked fourth in Forbes' "Best Franchises to Buy" and 39th in Entrepreneur's 500 ranking.

Despite the pandemic, 2020 proved no different for Marco's Pizza's persistent, rapid growth, as the franchise has its sights set on expansion in South Florida. The pizza chain will open 13 shops in cities throughout Palm Beach County by 2025, including Delray Beach, Boca Raton, and West Palm Beach, adding to its existing locations in Greenacres, Wellington, and Boynton Beach.

Aside from the pizza, franchisees attribute Marco's Pizza's success to its focus on community. Even before COVID-19, franchisees were encouraged to be active in their communities, dropping off pizzas at facilitates such as police departments, fire departments, and schools. The pizza chain has continued its donations throughout the pandemic and presently experiments with ghost kitchens, kitchen pods, pop-ups, and robotic kitchens. Like Papa John's, Marco's is also exploring its third-party delivery options.

Pizza Chains with Record Sales & Hiring Booms

Papa John's and Domino's also have flourished during the pandemic. Though previously embattled by upheaval at the top of the internal food chain, Papa John's sales spiked by 15 percent5 for a record $460.6 million, enabling them to hire over 20,000 workers during the quarter. Domino's also hired 20,000 new employees6, filling positions for pizza makers, delivery drivers, customer service representatives, managers, and assistant managers. Domino's Pizza's supply chain centers are also actively hiring CDL drivers, along with production and warehouse team members.

Little Caesars' Big NHL Deal

Little Caesars is now the official pizza of the National Hockey League. The pizza chain signed a multiyear agreement with the NHL for exclusive marketing rights, so fans should expect to see Little Caesars' brand displayed in the corner in-ice ad position during every game of 2020. This partnership will run through the 2020 to 2021 season.

The partnership comes as no surprise to hockey fans, as the pizza chain has built a well-established rapport with the sport for years. In 1982, Little Caesars' founders, Mike and Marian Ilitch, purchased the Detroit Red Wings, and in 1968, they began sponsoring amateur hockey. Little Caesars AAA Hockey is a well-respected and recognized organization in amateur travel hockey, placing various players in the NHL. The chain is the naming rights sponsor of the home of the Detroit Red Wings, Little Caesars Arena in Detroit, Little Caesars AAA Hockey Club, and the Little Caesars Amateur Hockey League.

More Pepperoni, More Problems

In August, a pepperoni shortage7 began threatening the pizza industry as prices of the staple topping skyrocketed. Because it doesn't reap a major profit for the meatpacking industry, pepperoni is low on the output priority list, and facilities have been struggling with COVID-19 safety guidelines for meat production. Large chains often sign contracts in advance and are less likely to be affected by the shortage than local pizza restaurants, but if the price of your pie goes up, topping scarcity could be the culprit.

Resources

  1. Food Donation Connection. Foodtodonate.com. Accessed July 2021.
  2. First Book. FirstBook.org. Accessed July 2021.
  3. Book It! Bookitprogram.com. Accessed July 2021.
  4. Pizza Hut’s largest U.S. franchisee files for Chapter 11 bankruptcy. CNBC. Accessed July 2021.
  5. Papa John’s Sees Highest Sales Month in Company’s History. QSR Magazine. Accessed July 2021.
  6. Domino's® to Hire 20,000 New Team Members to Help Busy Stores Feed Hungry Families Nationwide. PR Newswire. Accessed july 2021.
  7. America, Brace Yourselves for a Pepperoni Shortage. Thrillist. Accessed July 2021.